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When a property is improved (e.g. an extension is built), legislation prevents the Valuation Office Agency (“VOA”) from increasing the existing Council Tax band of that property until there is a “relevant transaction”.
The term “relevant transaction” usually means that the property in question has been sold as a freehold, or a lease for a period of seven years or more has been granted or transferred (i.e. sold to another party). A freehold sale also covers the situation where a leasehold owner/occupier pays a ground rent to a landlord who owns the freehold of the property, and the freehold only is subsequently sold on or bought by the leasehold owner/occupier. A ‘right to buy’ purchase is also a “relevant transaction” which could lead to a Council Tax band increase.
If you are a potential purchaser, or a leaseholder thinking of extending the lease on a property you occupy, you should be aware that, if the property in question has been improved since 1993, the Council Tax band will be reviewed after a relevant transaction has taken place. If a higher band is warranted, the new band will be based on what the property would have been expected to sell for on 1 April 1991.
Information relevant in the process which may lead to an increase in banding reaches the VOA from two main sources:
• a local authority providing the VOA with details of improvements made to property, usually from the planning and building control process; and
• sales information generated by a purchaser’s Solicitor via the Inland Revenue Stamp Office.
The VOA is an executive agency of the Inland Revenue which provides the Government with the valuations and property advice required to support taxation and benefits.

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