Frequently Asked Questions On Domestic Reform
The New Rating System:
Capital values:
Key Reforms:
Q20 How can I obtain further information on, or appeal against my capital value if I am dissatisfied?
What changes are currently being made to the domestic rating system and when will they come into force?
The domestic sector was last revalued in 1976 on the basis of rental evidence dating back to the late 1960s. Consequently it is out of date and is not as fair as it should be.The key aims of the Review of Rating Policy are to establish a fairer way of distributing the rating burden in Northern Ireland and make the system easier to understand. The current system is based on rental values and the Government has decided the new system will be based on individual capital values.
What consultation was previously undertaken on the reform of the domestic rating system and did this support the changes?
The NI Executive launched a public consultation in May 2002 and this lasted until October 2002. Responses supported the move from a rating system based on rental values to one based on capital values. As a result, the Government announced its intention to introduce a new domestic rating system based on capital values in December 2002.The Government commissioned further research as to whether this should be a banded system (like the Council Tax in GB) or one of individual capital values. It also conducted analysis on other associated issues, such as what reliefs should be introduced to support those people least able to pay. There was a further round of consultation on the Government’s preferred approach which was set out in a policy paper published on 21 July 2004. The proposals were the subject of a 16-week consultation exercise, which ended on 12 November 2004.The Northern Ireland Statistical Research Agency (NISRA) carried out a survey of 1300 households during the consultation period. In addition almost 400 consultation responses were received. Overall the outcome was encouraging with generally high levels of support for the reform proposals.
The remit of the Review of Rating Policy was, and continues to be, constrained by the Northern Ireland Act 1998, which places most issues of taxation beyond the powers of a devolved administration.This is main reason why the focus of the Review has been on property based taxes.The other alternatives considered and reasons not proceeded with were
- a site value rating, not considered to be a high yielding system;
- a lump sum tax, such as community charge, considered too regressive;
- property transaction charges, considered to fluctuate too much and resemble stamp duty too closely;
- charge based on a property’s area or per property unit, generally only used where there is a lack of property transaction information (usually confined to developing countries).
Options considered were a banded capital value system and a system based on individual capital values. A system based on individual capital values was considered to be more equitable, more new TSN positive and easier to understand.The Government therefore concluded that a system based on individual capital values was the best way forward.
Rate bills under the new capital value system will issue in April 2007, for the financial year 2007-08. At present your bill is calculated by adding together the regional rate and the district rate then multiplied by the NAV of your property. Your rate bill under the new system will be calculated by adding together the new 2007-08 regional rate and district rate then multiplying by the capital value of your property.
Your capital value will be used to determine your rate bill from April 2007 onwards. It will also be used to determine the variable part of the water charges to be introduced from April 2007.
The term capital value has been defined as the amount that the property could reasonably have sold for on the open market at 1 January 2005, subject to a number of assumptions. These include the assumption that the property has an average state of internal repair and fit-out, that it has no development potential beyond its current use and is free from restrictions.
This is the latest date that VLA can use to ensure that all 700,000 domestic properties are valued in time to allow rate bills and water bills to issue in April 2007 based on the new capital values. Having this date will ensure that all properties are valued by reference to the one point in time.
Any changes in the property market from 1 January 2005, up or down, will not affect your capital value until the next revaluation. This is scheduled to take effect in April 2012.
In assessing the capital value of your property, VLA has taken account of data collected from the recent sale of 50 000 properties in Northern Ireland, as well as the type, size and age of your property and the area in which it is located.
All households were informed of the capital value of their property during July and August 2006. The notification also included details of the information held on the property, such as its type, size, number of rooms and whether there is central heating or a garage. This information was also made available on the Valuation and Lands Agency website.
Why were capital values published as early as July 2006 if they will not be used for rating and water charging purposes until April 2007?
The capital values were published in advance to give you the opportunity to check the information held on your property and find out more about how your capital value was arrived at. You will also be able to ask a valuer to review your capital value if you disagree with it.
When ratepayers were notified of their capital values during the summer of 2006, they were also provided with an estimate of what their bill might have been had the new capital value system been in place then.
From April 2007, rate bills will be calculated by multiplying your capital value by the overall Regional and District rate levels. The Regional Rate is set by the Government while District rates are struck by each local council. This process usually takes place during February of each year. The amount of your bill will also depend on whether you are entitled to rate relief or transitional relief.
Domestic property including private storage premises and private garages will be revalued on a capital basis.
All domestic properties will be assessed on the basis of their capital value as at 1 January 2005. The Valuation and Land Agency will determine the capital value of each house or apartment taking account of sales evidence from the housing market.
It is proposed that revaluations will take place at least every five years and the capital value will remain unchanged if circumstances remain the same. The next revaluation will take place in 2012. The frequency of revaluations may subsequently be reduced in order to ensure that those living in areas with lower house price growth are not disadvantaged.
If the property is used for both domestic and non-domestic purposes, for example a business with living accommodation, then only the domestic part will be assessed on a capital basis.Non-domestic or commercial property will continue to be valued on an NAV basis.
Under the current rating system, when farmhouses are valued, account is taken of the fact that they are effectively tied to agricultural land and that their capital value could be excessively high, particularly in areas close to major towns and in tourist areas, where demand is not restricted to the farming community. The Government considers that this policy remains relevant today and intends to make similar provision for the valuation of farmhouses under the new system.
The new system will be based on individual capital values. This will not necessarily be the same as the value that would be obtained on the open market due to a number of valuation assumptions that will be taken account of. The capital value of a property will
- take account of the actual external repair but assume an internal standard appropriate to the type, age and location of the property,
- assume that the property will be used for domestic purposes only,
- assume that the tenure is fee simple, unencumbered and with vacant possession; covenants and certain planning restrictions will be ignored.
The capital value will not take account of any development potential.
When you received notification of the capital value of your property, your letter will also have contained the number of a telephone helpline where you can ring and discuss any queries you may have.Should you remain dissatisfied you can appeal against your valuation., a new appeal process will be established from April 2007 which has been specifically designed to be transparent and accessible to all.The three stages to this process will be –
- a review by the District Valuer;
- a review by the Commissioner of Valuation; and
- an appeal to a new Independent Valuation Tribunal.
As significant changes are being made to the domestic rating system, the Government understands the importance of establishing public confidence in the new system. It has ensured, therefore, that the new appeal process will be transparent and accountable. The process will also be more easily accessible and deal with ratepayers concerns at an appropriate level.
The reform of the domestic rating system will redistribute the rate burden in a fairer way. It is intended to provide assistance to those who experience a significant increase in their rate bill on moving to the new system. Transitional relief will be made available over a three year period and will be provided automatically to those whose bills increase by more than 33% over and above what it would have been had the NAV system been retained.
A rate relief scheme, based upon ability to pay rather than the status of the ratepayer, will be introduced. It will be distinct from any transitional arrangements and will be in addition to housing benefit.If you are on low income and are not getting full housing benefit or are just above the housing benefit threshold then you could benefit. Legislation will provide a future Assembly with the option of targeting this relief at particular groups.
Only where a property has been modified because of a person’s disability. We believe that people should not be penalised where their property has been modified to meet the needs of someone in the household who has a disability. A standard 25% reduction in the rates charged will be awarded to those that are eligible. If you currently qualify for a reduction in your rate bill because someone in your household has a disability then, after April 2007, if your circumstances are unchanged, you will retain your present reduction, or receive the standard 25% reduction if that would be more favourable.
There will be no relief specifically designed for single people. The new rate relief scheme is based on the ability of the household to pay their bill, regardless of their status. Single person households will therefore be eligible to apply.
It is not intended to introduce the rating of vacant domestic property at this time. While the Government believes that it is right in principle to rate vacant property, the costs of doing so in the domestic sector would outweigh the benefits.Government will introduce legislation which will allow a future Assembly, should it so wish, to introduce the rating of vacant domestic property.
Was account taken of equality, new TSN and rural proofing in adopting a system based on individual capital values?
Various impact analyses have been carried out on the policy proposals including those required under section 75 of the Northern Ireland Act 1998, namely age, gender, marital status, dependants, disability, race, religion, sexual orientation and political opinion. During 2002, in conjunction with the consultation document, an initial Equality Impact Assessment (EQIA) was carried out together with New TSN and rural proofing analysis. This concluded that the move to a system based on individual capital values would be New TSN positive, achieving a more equitable distribution of the rates burden by reducing average rate bills in more deprived areas and increasing them in less deprived areas. It also concluded that the impact on rural areas would be positive.A final EQIA was published, in July 2004, along with the Policy Paper and Summary Paper on reform of the domestic rating system in Northern Ireland.
The regional rate is a local tax used to fund all public services in Northern Ireland. There is no link between it and any specific service. Rather the revenue raised is used to contribute towards the cost of all public services in Northern Ireland.
