Costly cuckoos in the tax-free nest: As graduation day approaches, council tax trouble is looming for students sharing houses, Andrew Bibby reports

FINAL-YEAR students who have been sharing houses with other students may find that they inadvertently become unwelcome cuckoos in the nest the moment they graduate.

A curious quirk in the council tax rules means that as soon as one person in a previously all-student household graduates or leaves a course, all may immediately be liable for council tax. Even more unfairly, an ex-student on income support will find that his or her own share of the tax is paid automatically, but the remaining students will be ineligible for any assistance.

This has been exactly the problem faced by four friends sharing a house in Newcastle. As Beryl Orchard, manager of the Newcastle City Citizens Advice Bureau, explained, three have been finishing degree courses while the fourth has already completed her degree.

'She is claiming income support, but only getting council tax benefit of pounds 2.53 a week. She is going to have to persuade her friends to cough up. It is an extraordinary anomaly; if they were all on income support they would get a 100 per cent rebate, and if they were all students the house would be exempt,' she said.

A National Union of Students housing spokesman said the union was prepared for more cases to emerge with the end of the first academic year since the council tax was introduced. 'We haven't yet had any people ringing in, but it's something we're anticipating,' he said. Local authorities would encounter enormous administrative problems in sorting out the bills.

Although properties occupied solely by students are outside the council tax net, the details of the tenancy agreement determine who has to pay in other shared households. 'If they are all joint tenants, they are all jointly and severally liable to pay the council tax,' said Jim Read of the Child Poverty Action Group. 'What this means is that each individual is legally liable for making sure that 100 per cent of the bill gets paid. Even if you agree, informally, to pay a quarter each, you remain liable for it all.'

Joint tenants are in this position even if they are not all named on the tax demand.

The council tax benefit rules, however, operate differently so that, in the Newcastle case, the ex-student received benefit only for her quarter share of the total bill.

Confusingly, the overall council tax bill for the house was reduced by the 25 per cent 'sole adult' discount. Students are treated as invisible when bills are drawn up, even if they are later legally responsible for paying them.

The situation changes if house-sharers are not joint tenants. In some circumstances, it might be better if a non-student in receipt of benefit were the sole tenant in a shared household, though the benefit would be reduced to allow for the presence of non-dependents.

'The worst of all possible arrangements would be if one of the remaining students happened to be the owner or sole tenant,' said Jim Read, explaining that this person would then be liable alone for the full council tax. 'Students are normally debarred from claiming benefit from the first to the last day of their course, including intervening vacations. They'd be in real trouble.'

There is another twist if two friends in a shared household begin a relationship. Heterosexual couples (whether married or not) are treated as a unit under the benefit rules, so that a non-student could also claim for a student partner.

Jim Read advises students in shared houses where a council tax liability has arisen to seek advice from their local CAB. 'I can see that it could cause a lot of conflict in households,' he said.

(Photograph omitted)