Student accommodation is exempt from council tax - except when it is not

As a general rule where a dwelling is occupied only by full-time students no liability to pay council tax arises. If only it were that simple.

The status of a building and of the occupants are both important in determining the liability to council tax. Accordingly, anyone who owns, lets or manages student accommodation must make sure they understand the true status of the building and the tenants and who is liable to pay council tax – or they could be in for an unwelcome bill.

Exemption claims are being actively investigated

The government plans to stop reimbursing local government for council tax lost through exemptions (Autumn statement 2015).  As a result and encouraged by a reminder from central government about the data collection powers they have for this purpose, more councils are investigating exemption claims much more thoroughly.

The halls of residence exemption…

Council tax is not payable in relation to prescribed list of ‘exempt’ buildings. The list includes halls of residence (but subject to qualification conditions which require it to be owned or managed by an institution or for an institution has nomination rights) and dwellings occupied solely by students. Importantly, council tax exemptions are judged on a daily basis.

If a building qualifies as a hall of residence under the council tax tests, the actual occupants and periods of occupation can be ignored.

….and its limits

However, if the building does not qualify as a hall, it will only be exempt on the days where it is occupied by qualifying students. This can sometimes give rise to non-exempt periods during summer vacation periods.

Some councils are investigating past council tax bills and challenging the past claimed exemption status. If status as a hall of residence is changed, this places a burden on the provider to maintain details relating to occupation and gives councils scope to argue that council tax might be due for at least some of the year.

Who pays?

If council tax is due, you then have to determine who has to pay it. A resident will normally be liable ahead of an owner save for a list of prescribed cases where the liability is only with the owner. This includes houses in multiple occupation (HMO). Student cluster flats may amount to HMOs. Even in circumstances where a resident would be liable, the liability will revert back to the owner during unoccupied periods in any event.

Recommended action for landlords and property managers

• Check how your student accommodation buildings are treated for council tax purposes.
• If you are relying on an exemption based on a hall of residence, review the accommodation’s status and ensure current arrangements fulfil the relevant conditions, so that any challenge on status can be defended.
• Where the council tax position is based on student occupation:
  • ensure processes are in place to identify when any periods arise where the exemption will not apply, and
  • if there are any such periods, consider how, commercially, you recover such costs.