Owners of holiday homes which are made available to rent are getting a windfall of millions of pounds in tax relief.
Second home owners, whose properties are available to rent as holiday lets for 140 days of the year, often qualify as small businesses, and are entitled to relief on 100% of the business rates payable if their properties have a rateable value of less than £12,000.
Those whose properties have a rateable value between £12,000 and £15,000 are also entitled to relief on a sliding scale, in line with the Government’s small businesses rates relief policy.
Property consultancy Colliers International analysed 7,300 holiday homes in Cornwall and found that over 7,150 of those second home owners had properties with a rateable value of less than £12,000 and so are paying nothing in business rates.
This means that they are being subsidised by £13.2m a year. Over the five-year rating list, this equates to £66m – in one county alone.
John Webber, head of rating at Colliers International, said: “The Government’s Business Rate system is totally unjust and needs serious reform.
“It’s a scandal that those who have holiday homes and rent them out are able to take advantage of the Small Business Rates Relief and so pay less tax, putting the burden of the rates bill on to other businesses who are struggling to pay their bills.
“The 2017 business rate revaluation resulted in many businesses being hammered when revalued, particularly the smaller specialist high street retailers in the major cities, but also other businesses that provide jobs and make major contributions to the economy.
“I doubt many second home owners would begrudge paying these charges, but if the Government is foolish enough to allow this to happen then it is the Government’s running of the system that should be seriously questioned.”
He added: “We do not criticise second home owners that take advantage of this tax break. But we do criticise that the Government has allowed this situation to happen and has ignored the rating industry’s calls for root and branch reform of the business rates system.”
I understood, it was because 2nd home owners are most likely to be paying tax at 40% on the income they receive that the business rate relief brings the overall tax burden in line with what other business owners are paying. The relief is only available on the first premises not all of them.
Economically It is preferable to encourage 2nd home owners to make their properties available to holiday let outside the summer fortnight they might use the place themselves. The £1800 apparent give away brings far more into the holiday economies than ever the subsidy is costing.
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Whilst I appreciate second home owners have driven up property values and caused their own problems. Does the letting of holiday homes not add to, and bring to, income of local economies? when people holiday do they not have a tendency to spend more locally? Would discouraging letting not drive income away from local economies? If they can afford second homes they will have them anyway is it wise to encourage these to be left locked up 50 weeks a year? Do they not already pay an addition council tax levy? none of this is very straight forward is it?
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