Government closes tax loophole on second homes

Owners of second homes who claim their often-empty properties are holiday lets to abuse a tax loophole will be forced to pay under new government measures.

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 and the Lake District.

Under the new rules, holiday lets must be rented out for a minimum of 70 days a year to qualify for business rates.

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.

Secretary of State for Levelling Up Rt Hon Michael Gove said: ‘The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

‘However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

‘The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.’

Kurt Jansen, Director of the Tourism Alliance, commented: ‘Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes a very important distinction between commercial self-catering businesses that provide revenue and employment for local communities, and holiday homes which lie vacant for most of the year.

‘It is recognition that tourism is the lifeblood of many small towns and villages, maintaining the viability of local shops, pubs and attractions.’

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.

In related news, climate Change Minister Julie James has announced her intention to implement the Renting Homes (Wales) Act 2016 in six months, changing how homes are rented in Wales.

Photo by Greg Willson