Government to close second homes tax loophole

The Government will close a loophole which enables second home and holiday let owners avoid paying council tax and business rates.

Cornwall Council and Cornwall’s MPs have campaigned for years to get the loophole closed and ensure second home owners pay council tax or business rates.

It has previously been claimed Cornwall misses out on as much as £10million a year as a result of holiday homes not paying council tax or business rates.

Some areas of Cornwall have a large number of properties used as holiday homes and second homes.

Under current legislation people can avoid paying council tax on their properties by registering them as businesses and then stating they do not earn enough to require paying business rates.

But now the Government plans to ensure owners of properties cannot reduce their tax liability by declaring a property is available for let while making little or no realistic effort to actually do so.

New legislation will change the criteria determining whether a holiday let is valued for business rates rather than council tax in England to account for actual days the property was rented.

In England, a holiday let is currently only liable to pay business rates rather than council tax when the owners declare they intend to make their property available to let 140 days in the coming year. There are no checks to verify they are actually then commercially rented out.

Of the more than 60,000 holiday lets on the business rates list, around 96% have a rateable value which would likely qualify them for Small Business Rates Relief and as a result pay no business rates at all.

North Cornwall MP Scott Mann welcomed the announcement, and said: “It is wrong that second home owners pay no business rates and are exempt from council tax through a loophole, so I am delighted to support the Government in getting this issue resolved on behalf of North Cornwall.

“Addressing this issue of fairness in the taxation system will be especially welcome in communities such as Padstow, Rock and Boscastle.”

St Austell and Newquay MP Steve Double added: “I am delighted to see the Government listen to my campaign to close the loophole which allowed some second home-owners to register their properties as businesses and qualify for business rates relief and avoid making any contribution to local services, without actually being legitimate businesses."

Cherilyn Mackrory, MP for Truro and Falmouth also welcomed the news saying the loophole has allowed some "unscrupulous" second home-owners to claim business rates relief to avoid paying any rates at all

She added: "I look forward to seeing the detail and that this loophole will be closed as soon as possible to urgently address this unfair situation.”

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