EMPRESA Y DISEÑO DE MODELOS DE NEGOCIO
C. Acción y creación
STAGE IN SCOTLAND AND ENGLAND, AND RELATED COUNCIL TAX MANAGEMENT ISSUES
Introduction
3.1 This chapter identifies the principal differences in the law governing council tax in Scotland and England up to the enforcement stage. It then compares the council tax management practice and procedures in both countries. For the purposes of this chapter the term "recovery" is to be taken as the legal and administrative processes of issuing first reminders and final reminders together with the payment methods offered by councils to council taxpayers. Enforcement on the other hand is the legal and administrative processes involved in applying to the court for the necessary power to recover outstanding arrears by a number of statutory powers.
Calculation of the council tax base
3.2 Identical provisions exist in the 1992 Act for both England and Scotland regarding the dates for the setting of the level of council tax. The tax must be set by 11th March in the financial year before that for which it is set, but it is not invalid merely because it is set after that date.
3.3 For England the 1992 Act provides for the calculation of the amounts of a billing authorityÕs council tax in accordance with specified formulae. These take into account
§ the authorityÕs budget requirements;
§ its estimate of Revenue Support Grant and redistributed non-domestic rates;
§ any additional grant;
§ any appropriate income from fees, rents (non-Housing Rent Accounts referred to as non-HRA) and charges;
§ its share of any estimated collection fund surplus/deficit for the preceding year;
§ its council tax baseand 47.
3.4 Application of the formula gives rise to a basic amount of tax, which represents the amount of the billing authorityÕs tax for a band D dwelling anywhere in its area.
47 The council tax base is the measure in the council tax system of the relative taxable capacity of different
3.5 In Scotland there is no such formula set out in the Act because payments into a Collection Fund48 are not required. The Secretary of State for Scotland does not have powers to make Regulations49 for the calculation of a council's council tax base. In essence, the result from the different approaches is the same in Scotland and England although there is scope in Scotland for Scottish authorities to take different approaches to their calculations, and differences do occur. Such differences may not have any effect on the collection of council tax but could have an effect on a councilÕs headline figure for budget purposes, which is outwith the remit of the Team's research.
Provision for bad debts
3.6 Information on bad debt provision in 1997/98 provided by those councils who responded to the questionnaire are set out below, together with their percentage in-year council tax collection rate. The table shows a comparison of sample councils, grouped according to similarities in provisions for bad debts, and their in-year collection rates. The Table indicates that English authorities generally make lower provisions for bad debt than Scottish councils. If all other things were equal, the research team would expect authorities with high provisions for bad debt (as is the case in Scotland) to have lower in-year collection rates, and vice versa; the data in the table supports this expectation. Also shown on this table are those councils with dedicated recovery teams. Of the 30 Scottish councils shown, 50%
have dedicated teams compared to 84% in the English sample. The use of such teams is examined in Chapter 4 (para. 44).
3.7 A higher provision for bad debts means that the Band D equivalents will be depressed, giving rise to an increased level of council tax for that band. The higher rate of council tax will cascade through to a higher total of net billed council tax with that particular council not anticipating to collect the percentage provision made. In-year collection rates are measured against the total of net council tax billed and consequently an in-year collection rate for a council with a relatively high provision for bad debts will be lower than councils with a much lower provision.
48An account established and maintained by billing authorities, into which are to be paid receipts of council tax and non-domestic rates from ratepayers. Sums to be met from the fund are the authorityÕs own demands, precepts from major precepting authorities and payments to the non-domestic rates pool.
49 The Local Authorities (Calculation of Council Tax Base) Regulations 1992 as amended.
Table 9
A comparison of sample councils, grouped to show those with similar provisions for bad debts and their in-year collection rates; and an indication of those councils with
dedicated recovery teams.
Administration
3.8 Administration of council tax in Scotland and England is governed by the Local Government Finance Act 1992. In Scotland the principal secondary legislation is The Council Tax (Administration and Enforcement) (Scotland) Regulations 1992 as amended Ð S.I.'s 1992 No. 1332 (S.129); 1992 No. 3290 (S.264) and 1996 No. 430 (S.32). In England, the relevant regulations are The Council Tax (Administration and Enforcement) Regulations 1992 SI 1992/613 as amended.
3.9 So far as liability to pay council tax, entitlement to single adult residentÕs discount and eligibility for exemptions and reliefs are concerned, there are no fundamental differences between the regulations applying in Scotland and England, save for the following. In Scotland, in order to be exempt from council tax liability during a period of major reconstruction, a dwelling has to meet the definition of physically undergoing works; whereas in England and Wales there is a measure of discretion as to the exact timing of the works and an allowance for a period of inactivity, provided it can be shown that there is the intention to carry out the works as soon as possible, although this is about to change in England where there is a proposal to limit the exemption to one year. It is understood that a similar time limit will apply in Scotland from 1 April 2000; the Scottish definitions however will remain the same.
Billing for council tax Instalment dates
3.10 In both Scotland and England, councils must fix their council taxes for the financial year by March 11 of the preceding year. In both Scotland and England, the authority may issue demands (or bills) at any time after the council tax has been set. The statutory scheme in England50 prescribes that ten instalments are payable at monthly intervals (starting 14 days from the issue of the demand) if the demand is issued on or before 30th April. Where a demand is issued on or after 1st May in the financial year, the number of instalments will be the number of complete months remaining in the relevant year after issue of the demand, less one. English local authorities are able to require payment of the first monthly instalment at the beginning of the financial year, that is 1st April, if they so wish. In the sample taken, 10 English and Welsh local authorities had a first instalment date of 1st April, and the remaining 10 had instalment commencement dates up to and including 15th April.
3.11 In Scotland similar provisions51 are made for instalment arrangements for the collection of council tax. A significant difference between the two systems is that Scottish Regulations specifically provide that the first instalment cannot be demanded earlier than 1st May in the year of the charge. In 1997, 14 of the Scottish local authorities had first instalment dates of 1st May; the rest had first instalment dates up to and including 28th May. Thus there is a difference of one month between the earliest possible instalment demand dates in Scotland and England. A rather obvious effect of this difference is that billing and recovery cycles in Scotland run over a maximum of eleven months in a given financial year, as opposed to twelve months in England. This was an issue picked up by most of the Scottish
50 Part 1 Schedule 1 SI 1992/613.
51 Part 1 Schedule 1 SI1992/1332
authority respondents, who felt very strongly that Scotland should operate a first possible due instalment date of 1st April. The research team support this view.
3.12 Bar Charts A1-1 and A1-2 show for the Scottish and English sample authorities, the elapsed days from the 1st of April to the due date of the first instalment of council tax, overlaid with the average stated number of elapsed days from the due date of the instalment to the date of court action being taken. The graphs highlight the fact that Scottish authoritiesÕ earliest instalment dates commence at least 30 days after those set in England. If the statutory 30 days later start date for earliest instalments in Scotland is discounted, there is no significant difference between the range of elapsed days in the Scottish and English samples;
half of the sample authorities in both Scotland and England use the earliest instalment date available to them. In general, earlier first instalment dates tend to be associated with smaller numbers of elapsed days between when instalments are due and the first court action is taken.
There is however a trend for Scottish authorities to take considerably longer than English authorities to reach court action.
Note: Payment date sorted by number of days from 1st April 1997
Chart A1-1 Scotland
Due date of first instalment expressed in elapsed days from 1/4/97 and
the average number of elapsed days from the due date of an instalment to reach court action
5757 5757 5757 5757 5757 5757 36 44
3032 3030 3030 3030 3030 3030 30
100103
100 111112112112118 128131133 163 182 201 249 717677 84 101101103104 118121124 139
0 30 60 90 120 150 180 210 240 270
1 3 5 7 9 11 13 15 17 19 21 23 25 27
Number of Councils providing data
Number of days
Number of days before 1st instalment due Average number of days to reach court action
Note: i) Payment date sorted by number of days from 1st April 1997.
ii) Authorities 11 to 20 had a first due instalment date of 1 April 1997
Chart A1-2 England
Due date of first instalment expressed in elapsed days from 1/04/97 and
the average number of elapsed days taken from the due date of an instalment to reach court action
17
Number of Days before 1st instalment due Average number of days to reach court action
42
3.13 Table 10 provides details of the time scales for the recovery procedures that model councils in both Scotland and England could adopt, compared against the background of different recovery legislation. The table shows that the requirement to issue a second reminder in Scotland generates a 28-day difference in an authority operating an optimally timed recovery procedure.
Table 10
Administrative procedures for optimally-timed recovery in model councils in Scotland and England
Recovery Cycle Scotland England
Days Days Statutory
Grace days before issue of 1st Reminder 14 14 Statutory in England only Number of days within which whole
outstanding balance becomes payable 14 14 Statutory in both Grace period to clear queries and
responses to instalment Reminders 14 14 Number of days from issue of final
reminder before application can be made
to the court 14 Statutory in Scotland
only Grace days to clear queries and responses
to final notices 14
Benchmark days total 70 42
Reminder notices
3.14 Table 11 shows the differences in average lapsed times between key council tax recovery stages in both Scotland and England. From this table, it can be seen that on average the time lapse between date of first instalment and issue of first reminder in 1997/98 is 42 days in Scotland and 34 days in England. The research team is of the opinion that this eight-day difference is not a significant one. As was shown in Table 10, it should be noted that English authorities could only issue a reminder following the elapse of 14 days from the due date of the first instalment. Scottish authorities however are able to issue a reminder at any date following the instalment becoming due. In practice, as shown in Table 10, reminders in Scotland would not normally be sent out in the days immediately following the due instalment date, for reasons of allowing time for any payments through banks to be processed and wider customer care considerations. Analysis of the data reveals that in general, the earlier an authorityÕs due date for first instalment, the earlier it issues its first reminder; there is however a great deal of variation.
3.15 Table 11 also shows in columns 2 and 3 the average time lapse between the due date of payment of an instalment and court action. Column 2 shows the average time lapse for all responding authorities and indicates that Scottish authorities take on average 42 days longer to
obtain Summary Warrant than English authorities take to obtain liability orders. A difference in process which is likely to contribute to this difference is the requirement of Scottish councils to issue a final notice separate to the reminder notice (this was also shown in Table 10; also see later in this section). Column 3 shows the average time lapse for all respondents bar the three authorities in each country recording the greatest average time lapse. The averages are lower in column 3 than in column 2; however, the difference between the averages in the two columns is 3 days for Scotland and 12 days for England. This would suggest that in general the Scottish authorities tend all to have greater time lapses between due date of payment of an instalment and court action than do English authorities. This was not surprising to the research team given that the data was collected from just the second year after reorganisation; the upheavals caused by local government reorganisation impacted greatly on Scottish authorities' ability to initiate court action promptly after accounts fell into arrears. It is interesting to note that three Scottish authorities (whose data is not included in Table 11) never reached Summary Warrant stage within the billing year 1997/98. This was due to a variety of problems, including those caused by a switch of computer systems, following the change from the former Regional council platform (in respect of two authorities) and the withdrawal of system provision by a computer Supplier (in respect of one authority).
Table 11
Average time lapses between key recovery stages in Scotland and England Col 1
Average time lapse between due date of first instalment and issue of reminder
notice
Col 2 Average time lapse between due date of instalment and court
action
Col 3 Average time lapse between due date of instalment and court action, excluding greatest three lapses
Scotland (n = 26) 42 121 118
England (n = 19) 34 79 67
Note: n = number of councils
44 Table 12
Shortest and longest time lapses reported by Scottish and English councils between instalment due date and the issue of reminder notices and court action.
Shortest time
Note: n = number of councils
3.16 This table indicates that the fastest Scottish council, in terms of issuing reminders, is comparably as fast as the fastest English council in the sample. Importantly, this suggests that there are no insurmountable factors limiting the timing of the process in Scotland when compared to England. It is interesting to note that the English authority reporting the longest time between first reminder to court action had a 100 day longer lapse time than the next longest reported lapse time. The authority in question reported that it had encountered major software difficulties in migration from one computer supplier to another, and would otherwise have anticipated a figure of 90 days in place of the actual 240.
3.17 Data from the returns enabled an analysis to be made of the average elapsed time from the due date of an instalment to the average date of court action compared to the in-year collection rate achieved. Charts B1-1 and B1Ð2 show this analysis, expressing the elapsed time as a percentage of the total days in the year. The charts indicate that there appears to be no correlation between the early obtaining of Summary Warrants or Liability Orders and the in-year collection rates achieved. However, a difficulty in trying to examine a link between good management of the processes and improved council tax collection lies in the effect of strong external factors, such as overall social composition of the council area.
Chart B1-1: Scotland
Days from due date of instalment until application for Summary Warrant compared with the in-year collection rate
90.9
77.8 85.5
93.1
88.4 86.0
94.7 93.7 89.6
82.6
87.6 90.5 95.3
88.3 86.6 93.2
76.3
92.9 92.2 87.8
91.8 92.4 94.1 90.6
95.8
85.9
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Number of Councils providing information
Percentage
% Days % Collection Rate
Note: Days expressed as a percentage of 365 days and sorted.
Chart B2-2 England
Days from due date of reminder until application for liability orders compared with the in-year collection rate
97.5
82.0 89.5
96.2 95.7 97.8 97.2 96.0 97.5 96.0
93.0 97.4 98.0
93.6 93.9 93.8 92.4 94.4 90.7
0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
Number of Councils supplying information
Percentage
% Days % Collection Rate
Combining Reminders and Final Notices
3.18 In Scotland, there is a legal requirement for the local authorities to issue a final notice in addition to the reminder notices. Although there is a legal requirement on English local authorities to issue final notices, this is only in cases where there has been a variation from the sum due after issue of the reminder notice. Thus English local authorities are able to combine the legal requirements for collection into the single reminder and final notice. The large majority of Scottish practitioners in interview stated that they wanted to be able to have this mechanism for combined notices at their disposal.
3.19 Some Scottish revenues practitioners have expressed the view that the notice (reminder) issued to a council taxpayer who has failed to make payment of an instalment due could perhaps be combined with a final reminder under current legislation, in the same manner as can be adopted in England. The research team, whilst acknowledging that legal interpretation is ultimately a matter for the courts, is unable to support this view on examination of the regulations, which in their opinion quite clearly stipulate that a final notice is to be issued to each council taxpayer. In their opinion, the reason for this difference in approach compared to the English legislation is that the Scottish taxpayers do not have an opportunity to defend themselves in Court before a Summary Warrant is granted. The Part IV of the Regulations, generally with regard to the issue of notices, require councils to send them out in joint names where they believe that residents will be jointly and severally liable52. Because the Regulations under Part VII require final notices53 to be issued to each defaulter, the concept that the notice issued requiring instalments to be brought up-to-date can be combined with a final notice does not lie comfortably, in the research teamÕs view, with the requirements under those different Parts of the Regulations.
3.20 The Team's view on this is supported by comments expressed by Kneen and Travers54
:-"The authorities had wanted to be able to bill jointly throughout the whole process, right up to the pursuit and collection of arrears. However, the Scottish Office insisted that because of the existence of the expedited summary warrant procedure in Scotland, which gives powers to the authority to pursue arrears without bringing people to court, it was necessary that the final notice should be sent individually to all those jointly and severally liable. The reasoning behind this is that individuals e.g. spouses, flat sharers -may not be aware of their liability if one person has taken responsibility for bill payment."
3.21 It should be noted that the interpretation placed upon the English Regulations55 to allow the combination of the two reminders, stems from the fact that a council applying to the Magistrates Court56 for a summons only has to state that, at any time after an amount has
3.21 It should be noted that the interpretation placed upon the English Regulations55 to allow the combination of the two reminders, stems from the fact that a council applying to the Magistrates Court56 for a summons only has to state that, at any time after an amount has