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Council Tax worriesCouncil Tax backdating and the Limitation Act 1980

Council Tax legislation does not include any specific limits on backdating of discounts or exemptions (including Severely Mentally Impaired (SMI) discounts). Many councils will however try and use the Limitation Act 1980 to restrict backdating.

In recent years Valuation Tribunal decisions have generally agreed that the Statue of Limitations should apply with regard to backdating however they have found that the Statue of Limitations in itself isn’t a limit on how far back backdating can be applied. It is common for councils to apply the Limitation Act wrongly in respect of backdating. It should be noted that backdating of more than 6 years can still be problematic, depending on the exact situation which applies.

What is the Statue of Limitations ?

The Statue of Limitations, from the Limitation Act 1980, is intended to prevent an open-ended liability to legal action. Various time limits are specified in the legislation. Claims under or against statue are limited to 6 years under Section 9 of the Act. The section states that :

Time limit for actions for sums recoverable by statute.
(1)An action to recover any sum recoverable by virtue of any enactment shall not be brought after the expiration of six years from the date on which the cause of action accrued.
(2)Subsection (1) above shall not affect any action to which section 10 of this Act applies.

Arca v Carlisle City Council (2013) – the first major limitations case

In March 2013 the Valuation Tribunal case of Arca v Carlisle City Council (presided over by the Tribunal President Professor Zellick) found that there was no restriction on the time limits for backdating a disabled band reduction within Council Tax legislation “Unless there is some basis for limiting applications to a shorter period, it follows that applications may go back to 1993 when this tax and its associated arrangements were introduced. This may seem particularly surprising, but is in fact an illusory fear, as will emerge in the next section”.

The tribunal did however then go on to rule that the Limitation Act restricted any backdated award made to no more than 6 years. The backdating was given “subject to the six-year limitation period by virtue of s. 9 of the Limitation Act 1980.

Professor Zellick stated that “There may or may not be such an appeal in this case, but until the matter is settled by a higher court, or the regulation is amended, billing authorities would be well advised not only to regard this decision as representing a correct statement of the law but also as the interpretation almost certainly to be applied by this Tribunal in any future appeal raising the same point unless fresh legal arguments can be made.

Note should however be taken of later cases where the 6 year limit has been applied differently as the Valuation Tribunal President later stated that, in Arca, the interpretation and function of the Statute of Limitations had been misunderstood.

The case of H Singh (2015) – a major change in interpretation

In H Singh a situation occurred where an application for a backdated discount was made. Mr Singh had been receiving a reduction since December 2012 but later in 2015 he requested it be re-considered and backdated. It was shown that the local authority had information of eligibility as far back as 1996 but this had not been acted on.

The ’cause of action’ , for the purposes of the Limitation Act, was determined to be December 2012 when Mr Singh had applied for the initial reduction and that the appeal was therefore within the 6 year time limit for making a claim. The 6 year limit was found not to apply from the original date the discount was to be claimed from but from the date when Mr Singh had become aware he was entitled to a discount. Professor Zellick stating in his decision notice that;

The Limitation Act sets limits to when proceedings must be commenced in different types of action. Section 9 governs the “Time limit for actions for sums recoverable by statute”. The effect of this provision is that the claim must be commenced within six years of the accrual of the cause of action, as explained in my recent decision in Holdsworth et al v. City of Bradford MDC, 6 July 2015, Appeal No: 4705M141113/254C

President Zellick referenced his comment in the earlier case of Holdsworth, Cassidy & Phillips v City of Bradford (tribunal appeal reference 4705M141113/254C ) where he stated

The Limitation Act sets a limit on when proceedings must be initiated. If they are not brought within the maximum period following “the date on which the cause of action accrued”, then the action cannot proceed and must fail. The Act does not set a limit on the number of years in the past in respect of which sums may be recovered. That is the fundamental error made by the BA in these appeals

What happens if the adjustment was only made retrospectively ?

In an August 2015 Valuation Tribunal cases – Holdsworth, Cassidy & Phillips v City of Bradford (tribunal appeal reference 4705M141113/254C ) – the Valuation Tribunal President considered what would should happen where a Council Tax demand notice was issued due to the Valuation Office Agency retrospectively lowering the property band. This meant a new demand notice, which couldn’t have been issued any earlier, was sent out (similar situations will occur where a property has never been banded previously).

The local authority disputed that any backdating of refunds should occur beyond 6 years as otherwise it fell past the 6 year period given in the Limitation Act.  The Valuation Tribunal President, Professor Zellick, determined that an amount can only be property calculated once a demand notice has been issued (this principle is in line with other Council Tax cases). He stated that

They have simply assumed that s. 9, as interpreted and applied in Arca (an earlier case), sets a six-year maximum period for refunding overpayments. It does no such thing

The issuing of the demand notice was found to be the ’cause of action’ under the Limitation Act and therefore the claimants had 6 years from the date the revised demand notice was issued to claim any backdated refund. As the claimants had all applied for the backdating within 6 years of the revised demand notice being issued then they were entitled to the full amount. Professor Zellick stated that

The requirement to make a refund of council tax going back some 20 years may seem odd, but it is not the only odd feature of council tax law

Although this case was in respect of claiming refunds for an adjusted Council Tax band the same key principles could be argued in respect of any adjustment which retrospectively creates a new Council Tax charge and requires a backdated claim for discount or exemption.

Backdating for more than 6 years

Although s9 of the Limitation Act 1992 has been wrongly applied by local authorities in many cases involving the ’cause of action’ it is not however simply a case that discounts will be automatically backdated for more than 6 years in every case.

Local authorities have a duty to determine discounts prior to issuing a demand notice and should issue a summary with each demand notice of the discounts & exemptions available. The ’cause of action’ runs from when a person was aware that they could claim. In some cases the valuation tribunals have ruled that the person should have been aware that they could claim at the point when the demand notice and summary were sent out and, therefore, they applied the 6 year limit from that date to claim a discount (i.e. the ’cause of action’ was deemed to be the date of these documents). This principal however can be argued and will not always apply in every case.


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