Government to close second homes loophole

The Government has announced that it will close a loophole that enables second home and holiday let owners to avoid paying council tax and business rates.

Cornwall Council and Cornwall's MPs have campaigned for years to get the loophole closed and ensure that second homeowners pay council tax or business rates.

It has previously been claimed that Cornwall misses out on as much as £10million a year as a result of holiday homes not paying council tax or business rates.

Some areas of Cornwall have a large number of properties used as holiday homes and second homes including St Ives where the town council approved a policy in the neighbourhood development plan to prevent any new properties from being used as second homes.

Under current legislation, people can avoid paying council tax on their properties by registering them as businesses and then state that they do not earn enough to require paying business rates.

To ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no real effort to actually do so, the government will legislate to change the criteria determining whether a holiday let is valued for business rates rather than council tax in England to account for actual days the property was rented.

In England, a holiday let is currently liable to pay business rates rather than council tax when the owners declare they intend to make their property available to let 140 days in the coming year. There are no checks to verify that they are actually commercially rented out.

However of the over 60,000 holiday lets currently on the business rates list, around 96% have a rateable value which would likely qualify them for Small Business Rates Relief and as a result pay no business rates at all.

North Cornwall MP Scott Mann welcomed the announcement saying:

"It is wrong that second homeowners pay no business rates and are exempt from council tax through a loophole, so I am delighted to support the Government in getting this issue resolved on behalf of North Cornwall.

"Addressing this issue of fairness in the taxation system will be especially welcome in communities such as Padstow, Rock and Boscastle."

St Austell and Newquay MP Steve Double added:

"I am delighted to see the Government listen to my campaign to close the loophole which allowed some second home-owners to register their properties as businesses and qualify for business rates relief and avoid making any contribution to local services, without actually being legitimate businesses.

"This is something I have been calling for, for some time, asking questions in Parliament, and meeting with Ministerial colleagues to push for the change which is needed to close this loophole, and I am pleased to see the Government is now pressing ahead with this.

"I look forward to seeing the detail of the proposed legislation, and will continue to work to ensure this loophole is closed as soon as possible."

Cherilyn Mackrory, MP for Truro and Falmouth, also welcomed the news saying:

"Going back to my time as a Cornwall Councillor the loophole which has allowed some unscrupulous second homeowners to claim business rates relief for their properties and therefore avoid paying any rates at all, despite not being legitimate businesses, has been one that I have asked to be closed.

"Since my election in 2019, I have worked with my Cornish MP colleagues to make the case to the Government for this closure, and was pleased to see them consulting on this, despite the delays that have occurred due to the COVID-19 pandemic.

"I am pleased to see the Government has listened and will be responding positively to the consultation. I look forward to seeing the detail and that this loophole will be closed as soon as possible to urgently address this unfair situation."

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