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All council tax rates used for illustration on this page are the averages for each band in England in 2010 – 2011. Because of the council tax freeze the rates are the same in 2011 – 2012.

Council Tax legislation defines two types of dwelling.  The first has to do with the concept of hereditaments or rateable occupation as used in the General Rate Act of 1967. The second type of dwelling is concerned with self contained units, and the following definition is given

'“self-contained unit” means a building or a part of a building which has been constructed or adapted for use as separate living accommodation.'

Such units would not have been subject to separate taxation under previous legislation unless they were separate hereditaments. They would have been regarded as part of the main building in which they were situated, and would not be identified as separate entities. For council tax purposes these units were classified as dwellings, and would therefore be subject to separate taxation. Council tax law effectively "created" a great many new taxable dwellings, and these would be allocated to valuation bands. When council tax came in, it wasn’t just a case of valuing people’s homes and charging tax on them; instead the definitions used in the legislation brought into existence a great many new dwellings that would not have been thought of as dwellings before. In a great many cases these self contained units have no market value, and can not actually be sold separately from the main building in which they are located. However they can still be included in the council tax banding system because it has a lower limit of zero. Units that have no market value would generally be placed in band A, and this means that they will be taxed as if they were worth £40,000, and the amount payable  would be a third of that charged  on ten million pound mansions. In 2011 – 2012 self contained units in band A will be charged an average of £959 in England.

If there are more than one self contained units in a building then each will be regarded as a separate dwelling. The law states that every self contained unit that can be found in a single hereditament must be treated as a separate dwelling. The process of identifying self contained units in hereditaments and treating them as separate dwellings is referred to as ‘disaggregation’. Article 3 of the Council Tax (Chargeable Dwellings) Order 1992 states

"… Where a single property contains more than one self contained unit, for the purposes of Part I of the Act (the Local Government Finance Act of 1992), the property shall be treated as comprising as many dwellings as there are such units included in it and each such unit shall be treated as a dwelling."

An example might be a house with a self contained unit such for use by a member of the family (e.g. a "granny flat"). The house is a single hereditament and under the old rating system this would have been regarded as one house and it would receive a rates bill reflecting the value of the building as a whole. With council tax the house and the unit are treated as two separate dwellings and two bills are payable. The effect of having such a unit can be to increase the amount of tax payable on a house quite markedly, even though the unit itself would probably not add much if anything to a house’s value. The amount the tax increases by will depend on which bands the two "dwellings" are placed in. Assuming the unit is in band A, then if the house is also in band A the owner will have to pay £959 for the house and another £959 for the unit. Therefore the amount payable is doubled. If the house is in band H the owner will be charged £2,878 for the house and £959 for the unit, an increase of a third. In the event that the unit is allocated to a higher band than A, then the increase will be correspondingly greater.

If a self contained unit is occupied by a dependant relative of a resident of the main part of the property then a Class W exemption may apply. The occupant of the self contained unit will be eligible for exemption from paying council tax on the unit if it is their sole or main residence and they are dependant on the caring relative living in the main part of the building. (See dependant relative exemption.) However if the unit is vacated by the occupant then relief under the Class W exemption is withdrawn.  The unit will continue to be banded separately for council tax and the owners of the main house may be liable for the bill.

Because of the banding system which caps the amount payable on the most expensive homes at £2,878 and assigns a minimum rate of £959 on dwellings that have little or no value, the number of self contained units in a building can have a far greater effect on the total amount of council tax payable than the market value of the building taken as a whole. If units are not self contained there are discretionary powers to "aggregate" them and treat them together as one dwelling. If however they are self contained there is no discretion and they must be disaggregated, and there will be as many dwellings as there are self contained units. Therefore the aggregation-disaggregation issue is crucial in determining the amount payable on a building.

A case that went before the courts involved 10 flats in a hostel for homeless young people. In addition to this accommodation, there were management and staff facilities which were separately rated, and the hostel also included communal facilities. The building was a single hereditament under the paramount occupation of a single owner. The appeal centered on the contention that the flats were not separate self contained units. If it is decided that the flats are not self contained then they may be aggregated and treated as one dwelling with one council tax bill. If on the other hand it is decided that that the flats are self contained then they must be disaggregated and treated as ten dwellings with ten council tax bills. The effect of this is to multiply the amount payable by at the very least three and a third.

Aggregated and disaggregated hereditaments may have the same value as buildings, and may accommodate the same number of people, but the decision to disaggregate can increase the total bill considerably. In 2010 – 2011 council tax has an average maximum of £2,878 in England (i.e. band H), while the average minimum is £959 (i.e. band A). If the latter amount is multiplied by ten the bill is £9,590 instead of £2,878.

The statutory definition of self contained is open to interpretation and it has been left to the courts to consider its meaning and to decide the characteristics a unit must have or need not have if it is to meet the criteria of 

'…constructed or adapted for use as separate living accommodation.'

A number of general principles of disaggregation have been formulated. Here we give some examples of the sort of factors that the courts have deemed to be relevant when making this decision.  It is not suggested that this is an exhaustive list and the judgements given here are to the best of our knowledge. Please consult the official documents for the precise legal position.

Access and egress to the unit can be a material factor. A unit does not need to have its own access to be considered self contained. It has been decided that if access to a unit is via the hall stairs and landing of the house in which it is situated then this does not prevent it from being separate living accommodation. If however access is through the lounge of the main house then it will not be separate. The degree of communal living is not considered relevant. For example if there are a number of self contained units within an hereditament, the fact that there may also be facilities for communal activities does not preclude the units from being separate living accommodation. There is also an objective physical test for disaggregation – the unit must actually have been constructed or adapted for use as separate living accommodation. In making this objective test, intention must be disregarded. It is not relevant by whom or how the adaptations were done, or for what purpose they were done. It has also been decided that the unit must be physically capable of use as separate living accommodation. This requirement concerns the physical characteristics and layout of the accommodation. The physical identity of the accommodation should also be taken into account. To be regarded as self contained the unit should not normally be spread across different parts of a building. For example the person or persons occupying it should not have to cross a common hallway from one part of the accommodation (e.g. kitchen or bathroom) to reach another (e.g. bedroom or bathroom). To be classed as self contained a unit should usually have certain facilities – it should have areas capable of use for living, sleeping, washing, preparing and cooking food, WC, and bathing facilities (e.g. bath/shower). There may however be exceptional circumstances where a facility is lacking and the where the unit is still regarded as self contained. (Shared bathing facilities for instance.)

The actual use of the accommodation in the unit is not a relevant factor in determining whether or not it is self contained. For example, if a self contained unit has a bedroom or kitchen; it does not matter if these rooms are now being used for some other purpose, such as a living room or utility room. The unit is still self-contained. Nor does it matter if the unit cannot be sold separately from the main dwelling. Even if there is a restriction preventing the unit from being sold separately from the main building it is situated in, it will still be self-contained and banded for council tax. The assumption must be made that the accommodation is sold freehold or on a long lease. Planning restrictions do not override the fundamental principle of an objective bricks and mortar test. The restriction on sale may however affect the valuation band the unit is assigned to. The impracticality of selling a unit separately from the main dwelling (e.g. due to having shared services) does not prevent it from being separate living accommodation. Although it has been argued that the valuation of dwellings assumes that they can be sold separately, this argument has been rejected in court.  If a unit can be sold separately either on a long lease or freehold, then it provides an indication that it is selfcontained. But the reverse is not necessarily the case. Just because part of a building cannot be sold separately does not prevent it from being separate living accommodation. However this factor may be relevant to the valuation of dwellings.

If a self contained unit is part of or on the same site as another property and cannot be let separately from the other property without breaching planning permission then it may qualify for a Class T exemption. There may also be situations where flats or bedsits are not fully self contained but are still banded separately for council tax. In these cases the accommodation may be separate hereditaments which would have been taxed under the old rating system. The sort of accommodation that is commonly found to be self contained include, self contained units for elderly relatives (granny flats), wardens accommodation in student halls of residence, accommodation formerly used as servants quarters in big old houses, and adjoining houses or flats that used to be separate residences but now used as one home. They would also apply to dwellings that are banded separately in hostels and some types of buildings comprising a number of flats or flatlets.

The existence of taxable self contained units in a property could be a disadvantage in selling it in that a prospective purchaser might be put off buying a building where more than one council tax bill has to be paid. There may therefore be an incentive for people to want to alter the unit so that it is no longer deemed to be self contained.  Generally speaking, the valuation office always views properties as being in reasonable states of repair. Removing fittings that could normally be replaced does not prevent a unit from being self contained. Alterations would have to be more significant so that the character of the unit is entirely changed and substantial reinstatement works would need to be performed to turn it back into a condition where it could be used in its original form. For instance if a person removed a cooker point or sink but left the plumbing and drainage in place this would probably not be enough to stop the unit from being selfcontained. There is therefore an incentive to remove facilities that were put in as improvements and in this sense council tax can be regarded as encouraging detrimental alterations to property. It is out of step with our newer forms of taxation which are designed to encourage positive behaviour e.g. green taxes.

The introduction of the concept of self contained units combined with the use of a banded valuation system effectively retained the poll tax for the usually low income people living in them. It meant that even dwellings that had no market value at all could be taxed as if they were actually worth something. Self contained units placed in the lowest band would be required to pay the same amount of council tax as houses worth £40,000 in 1991. Unlike homes that   are tangible assets, that for example can be bought sold and mortgaged, these units would not benefit from house price inflation. Since 1991 when council tax was brought in the average UK house price has increased by around 200%. A home worth £40,000 then could now be worth over £100,000, but it could still be in band A along with units that are worth nothing and are paying the same amounts of council tax. The banding system imposed a minimum level of council tax (currently averaging £959) on the predominantly low income people that occupied units. While in a technical sense they may be dwellings, they are outside the scope of the housing market, and therefore of a taxation system based on the value of homes. If the government had introduced an ad valorem tax (i.e. proportionate to the value of the property) instead of using a banding method then those living in accommodation that has no market value would pay no tax, which is as it should be with a system based on property prices.

















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Copyright (2007)