British homeowners spend billions of pounds every year improving and extending their homes, but a major issue has arisen that could leave them thousands of pounds out of pocket.
The work many homeowners undertake includes converting the existing loft space, adding a spare room above the garage or even carrying out a large extension to improve the overall living space.
One of the big incentives is to improve the home they live in, to avoid the time, trouble and expense of moving into a new property.
However, for those people who add an extension or an annexe there could be an unexpected and unwanted financial surprise as a consequence.
An annexe or extension could be a ‘separate property’
It’s become apparent that the local authority may view the extension or annexe as not being one property but two separate ones – with each deserving of a separate council tax bill.
This problem was recently highlighted in an edition of the BBC series ‘Rip-off Britain’ which examined the issue by visiting two couples who had unwittingly been caught out by the rules.
One couple in Devon had moved into a bungalow which had an annexe, which was one of the primary reasons for them buying the property since the extra space meant visitors could be accommodated easily.
When they moved in, the annexe consisted of a spare bedroom with en-suite facilities and a utility room.
Make no mistake, the couple had no quibble with the build quality of the annexe itself since it has passed every building regulation when it was completed.
Council tax bills from the Valuation Office Agency
However, the Valuation Office Agency, a part of HM Revenue and Customs, did not revalue the property for Council Tax when the work was completed.
Though they did take notice when the couple bought the property and asked if one of their team could come and have a look around.
There then followed a report which claimed that the annex was self-contained and would receive a separate council tax bill.
The utility room was classed as a kitchen because it contained a sink and because there was a power socket, the report said a microwave could be used for cooking facilities.
The report also said that the patio doors were a separate entry into the extension.
Be wary of problems when building extensions or annexes
This meant that despite using the annex as a guest room, the couple faced an additional council tax charge of a £840 on top of the £1,400 they were already paying.
Two years and a failed appeal later, the couple have paid nearly £2,000 in extra council tax and then forked out for alterations to the annexe to ensure it complies with the rules on it not being a separate building.
In the programme, the couple concerned said – rightly – that the issue is around the potential use of the extension or annexe as separate accommodation.
But that’s not all – eventually the couple did enough for the property to be considered as a single dwelling but the Valuation Office then upped the tax band for the property so they ended up paying a big chunk more in council tax anyway.
This isn’t a small problem by any means – official figures state there are 24,000 annexes in England alone with all of them being liable to the double council tax rule – or for the homeowner to face an increase in their overall council tax rating valuation.
Get professional advice before undertaking extension or annexe work
The second of the two couples featured in the BBC programme highlighted a real problem facing many people who decide they want to build an extension or create an annexe – the fact that no-one warned them of the potential consequences.
This is a serious issue for many homeowners in the UK since their architect or council planning department will not generally flag up the double council tax issue.
One bright spot for the second couple is that after the programme’s intervention, the council says it will warn people who apply for planning permission that the work may have an impact on their council tax bill.
This is indeed a step in the right direction but it’s too little, too late for the couple featured on TV and it may not inspire people who put in a planning application to complete their work.
Experienced drawing and planning service for extensions
Here at Selby Design we are proud of our track record in helping people realise their dream of building an extension or an annexe and our service is so much more than offering a drawing service.
Selby Design offers a full range of services which extend from drawing, to planning, to project management and this means we offer advice based on our experience and expertise.
This to us is where the couples featured on BBC’s ‘Rip-Off Britain’ went wrong. At no point did anyone in the buying of the property process or in the building of an extension highlight the potential that the homeowners were creating a separate property.
That would mean a separate council tax bill under current rules.
Expert help in preventing a double council tax bill
Fortunately, this is something we would have told our clients because we believe in taking that extra step in offering a competitive service that will not let clients down.
In a nutshell, that is the simple answer to avoiding this sort of misunderstanding – it is vital that before any building work is undertaken that the research on building permissions and regulations are fully investigated but then the possibility of extra council tax should also be examined and advice sought.
Expert advice in creating extensions or annexes will help the homeowner from being hit with a double council tax bill so we would urge everyone to ask these questions when looking for a designer or builder – or simply give us a call before you proceed with any designs and we can assist you through the entire process.
For more information:
The Valuation Office Agency has a dedicated page about council tax while the Valuation Tribunal will help deal with any queries or complaints about a double council tax bill or council tax valuation banding.