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Second homes tax to be reviewed as loophole costs councils millions of pounds
Second homes tax rules are to be reviewed over fears a holiday accommodation loophole could be costing millions of pounds in lost council tax.
Under current rules, owners can declare their property available as holiday accommodation for 140 days or more in a year and have homes valued for business rates, rather than council tax.
However, properties registered for business rates can qualify for small business rate relief, which provides 100% relief on rates for properties with a rateable value – or rental value – of £12,000 or less.
The government has launched a consultation on whether checks against abuses of the system should be strengthened.
It’s estimated around 47,000 holiday lets in England are liable for business rates and 96% have rateable values of £12,000 or less.
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But there is no requirement for evidence that a property has actually been commercially let.
As a result, owners of second homes not in this category could exploit the system by not paying council tax, whilst still using local services, the government said.
Local government minister Rishi Sunak MP 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 will seek views on whether the current criteria should be strengthened to ensure second home owners are contributing to the local economy through the proper payment of council tax, or, for those genuinely renting out their property and supporting tourism, business rates.”