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Ensuite HMO's Taxed As Individual Dwellings


A member and owner of a shared (HMO) property in London Road, Portsmouth has lost an appeal against the Valuation Office Agency (VOA) decision to charge Council Tax separately on each room in the property.

What Is The Problem

Council Tax has long been the bane of members, especially those with HMO's as allowances and exemptions have been reduced over the past few years. However, until now, it was always levied once per property - so a typical 3-4 bed HMO in the city would be classed as Band D and pay £1,732 per year or the appropriate proportion relevant to when the property was unoccupied or the students were 'no longer students'.

However, there have been occasions when the VOA, who decide banding and other details for the purpose of the payment of Council Tax, have blurred the distinction between a flat/apartment and a shared room.  If you have a block which is divided into 8 flats, say 2 on each floor, then no one argues that each flat should not pay Council Tax. 

If the same block has a single communal entrance but contains, say, 12 bedsits - each self contained single rooms with no shared facilities, few would argue that this is little different to 12 studio apartments and each should pay Council Tax. The issue arises when tenants share kitchen, bathroom or lounge facilities - we have always believed that a dwelling cannot be treated as self-contained or separate if it is incomplete - for example has no kitchen facilities, so an HMO with shared kitchen and bathroom should be treated as one dwelling and until recently this was the case.

However, increasingly the VOA has been ruling that if a property is an HMO and the rooms have ensuite bathing/toilet facilities, then they could operate as standalone dwellings and should be taxed accordingly.  Unfortunately this is just one more example of the lack of consistency between government departments - for council tax a 'dwelling' is fine as long as it has a bathroom whereas for planning and/or licensing completely different and conflicting definitions apply.

In the situation in London Rd, the HMO had 5 rooms, each of which was ensuite  but occupants had shared kitchen and bathroom facilities and the VOA had decided to treat the property as 5 separate dwellings for tax purposes (so £5,775 tax as opposed to £1,732 each year).  The appeal argued that not only was this wrong, but that it would make the rooms unaffordable in the Portsmouth area and gave as an example, a frontline worker who was residing at 137A London Road had tested positive for Covid-19, all the residents within the property had to self-isolate. That resident could not keep solely to their individual room as there were no cooking facilities within the room.

And note, this is not the case of a local landlord squealing because this makes him or her worse off - this is a genuine issue which in this case, was supported at appeal both by the local councillor, Tom Wood and the local MP, Penny Mordaunt who raised it with the Secretary of State for Housing and Local Communities, Robert Jenrick.

See the full report of the appeal here.

The appeal was lost and the VOA decision to tax each room separately stands unfortunately. Portsmouth rents have already risen by 10% more than Southampton rents in the past year due to the extreme requirement here for additional space for occupants. Decisions like this will only increase rents further, thus increasing the burden of homelessness and evictions on all agencies in the area.

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