Plans to close second home business rates ‘loophole’
The government is consulting on plans to close a business rates ‘loophole’ which could be costing English councils millions in lost council tax because of second-home owners claiming small business rate relief on holiday lets which are not, in fact, let out under commercial arrangements
7 Nov 2018
Currently, second-home owners pay council tax on their properties including when the property is available to rent infrequently during the year.
Properties are valued for business rates when owners declare their property is available to let as ‘holiday accommodation’ for 140 days or more in a year.
Any property registered for business rates, rather than council tax, is likely to qualify for small business rate relief. This provides 100% relief from business rates, so no tax is due on properties with a rateable value of £12,000 or less.
Research published by the ministry of housing, communities and local government indicates around 47,000 holiday lets in England are liable for business rates, of which circa 96% have rateable values of £12,000 or less. Currently there is no requirement for evidence to be produced that a property has actually been commercially let.
The government says it is aware of concerns that owners of second homes which do not fall into this category, could exploit the system by not paying council tax, while still using local services.
In light of this, the government proposes to strengthen the criteria for a holiday let to be liable for business rates. One such option could be to allow a property to be liable for business rates rather than council tax only if:
a) In relation to the year being considered, the property will be available for letting commercially as self-catering accommodation for short periods totalling at least 140 days;
b) During the year immediately prior to the year being considered, the property was available for letting commercially as self-catering accommodation for short periods totalling at least 140 days;
and c) During the year immediately prior to the year being considered, the property was actually commercially let as self-catering accommodation for short periods totalling at least 70 days
Rishi Sunak, local government minister, said: ‘We’re aware of concerns that the current arrangements for valuing second homes for business rates and claiming relief, do not provide strong enough protections against abuse.’
The consultation will close on 15 January 2019.
Report by Pat Sweet