James has welcomed today’s announcement by the Treasury that it will legislate to tighten tax rules for second property owners meaning they can only register for business rates if their properties are genuine holiday lets.
In England, many holiday lets are liable to pay business rates, rather than council tax, when an owner declares that they intend to make their property available to let 140 days in the coming year. There is no requirement for business rates purposes to undertake checks to verify that they are actually commercially rented out.
Second home owners make an important contribution to the local economy and businesses and providing employment for local people as well as paying council tax. However there are concerns that some owners claim rates relief of up to 100% and so pay no business rates (or council tax) by declaring a property is available for let but make little or no realistic effort to actually let it out.
The government will legislate to change the criteria determining whether a holiday let is valued for business rates to account for the actual days the property was rented.
James has been campaigning for changes in the rules and met Luke Hall MP, the Local Government Minister, earlier this month to make the case. He has been working with parish councils including Burnham Overy, Burnham Market, Thornham and others to highlight concerns at the unfairness of the burden falling on permanent residents, depriving parish councils of precept income to support village activities, as well as other loss of council tax income.
Commenting on the announcement, James said: “Holiday lets that are genuine business should rightly benefit from business rates relief along with other firms. However, there are concerns that some property owners are reducing their tax liability but failing to meet the eligibility rules. I welcome that the government is now going to close this loophole which is unfair to other taxpayers and means that councils lose out on income to provide services and support village activities.”
The change announced today will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out.
Of the over 60,000 holiday lets currently 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
Further details of the change and implementation will be included in a MHCLG response to the consultation on the business rates treatment of self-catering accommodation which will be published shortly.
Details of the Treasury announcement are available here