Tax clampdown threatened for second-home owners who game ‘lettings’ rules

The rules about holiday lets being valued for business rates instead of council tax could be strengthened in an attempt to close a tax loophole being exploited by the owners of second homes.

If they declare that the property is available for holiday letting, then they can receive favourable tax treatment.

They do not have to prove that the property actually was let, or even whether it was marketed for letting.

Currently, holiday lets on business rates are likely to qualify for Small Business Rate Relief, providing 100% relief on business rates – meaning no tax is due on properties with a rateable value of £12,000 or less.

For properties with a rateable value of £12,001 to £15,000, the rate of relief decreases gradually from 100% to 0%.

To qualify, the property has to be available for letting for short periods totalling at least 140 days a year.

As at April this year, there were 47,000 holiday lets in England liable for business rates, of which 96% qualified for relief, having rateable values of £12,000 or less.

However, the Government is concerned that some owners of ‘holiday lets’ are gaming the system.

In a new consultation, the Government is now proposing to toughen up the 140-day rule.

It is suggesting that to qualify for business rates, in the previous year the property must have been available for at least 140 days and actually have been let for short periods totalling at least 70 days.

Local government minister Rishi Sunak 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.

“We are seeking views on whether we should strengthen the checks already in place to ensure second-home owners have to pay council tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.”

The consultation runs until January 16.


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