Second Home Owner Tax Loophole Closed

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Second Home Owner Tax Loophole Closed

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Today 14 January the government have announced that they are closing the loophole that has allowed second home owners to avoid paying council tax and business rates whilst protecting genuine holiday lets.

It has been a bone of contention locally for some time now that second home owners have been able to avoid paying council tax and receive small business rates relief by claiming that they intend to let their property to holidaymakers. However, as of April 2023 they will now have to prove that they are in fact commercially renting out their property. This will mean that second home owners will now have to pay fairly towards local services.

The governments press release states:

  • Homeowners who leave properties empty while pretending to let them to holidaymakers will be targeted
  • Under the new rules, holiday lets must be rented out for a minimum of 70 days a year to qualify for business rates, which often brings financial advantages
  • Changes to tax rules will protect genuine holiday lets and benefit popular holiday destinations, including Devon, Cornwall and the Lake District

"Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under tough new measures announced by the government today (14 January 2022).

The changes will target people who take advantage of the system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers. However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following consultation, the government will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief."

Anthony Mangnall MP said:

"After two years of campaigning with Cllr Judy Pearce, Leader of South Hams District Council, it is welcome news that the Government has taken this step. South Devon has one of the highest concentration of second homes in the country. This announced change will help to stop people utilising an unforeseen loophole while also ensuring that they pay their fair share. Both the Chancellor and Michael Gove have listened carefully to our needs and I hope this will be the first step of many to help improve accommodation issues in the South West and beyond."

Cllr Judy Pearce, Leader of South Hams District Council said:

"This is excellent news as a result of a sustained campaign by South Hams District Council, Anthony Mangnall MP, and myself to get this loophole in the business rates system closed.  This is important for community cohesion. 

"Second home owners should be paying into the local community unless they are genuinely running a letting business.  Services such as highways, the fire service and the police, which can equally well be used or needed by holiday makers, will benefit, as will the general income of the District and County Councils.  We welcome all visitors, but hard-pressed local residents should not have to subsidise services for them."

Under the new rules, holiday lets must be rented out for a minimum of 70 days a year to qualify for business rates. Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts. Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

The Council currently has just under 1,800 business rated properties that are self-catering holiday lets.

At a time when there are severe funding problems with all tiers of Local Government (particularly adult social care) and our emergency services are under increasing pressures, South Hams District Council spearheaded a campaign to make the point that the current system is fundamentally unfair. Small business rate relief was implemented to support our small business, village halls and local shops. The rules have been taken advantage of, to allow people to not pay for the local services they are using.

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