A consultation into a business rates ‘loophole’, which could be costing councils in England millions of pounds, has been opened. The issue arises when second homes are confused with business lets.
Currently, second-home owners pay Council Tax on their properties even when the property is available to rent infrequently during the year. Properties are valued for business rates when owners declare their property is available to let as ‘holiday accommodation’ for 140 days or more in a year.
Any property registered for business rates, rather than Council Tax, is likely to qualify for small business rate relief. This provides 100 per cent relief from business rates, so no tax is due on properties with a rateable value of £12,000 or less.
Around 47,000 holiday lets in England are liable for business rates, of which about 96 per cent have rateable values of £12,000 or less. Currently there is no requirement for evidence to be produced that shows a property has actually been commercially let.
Genuine businesses can claim the relief to which they are entitled. However, the Government is aware that owners of second homes that do not fall into this category could exploit the system by not paying Council Tax, even though they are using local services.
The consultation, which runs until 16 January 2019, seeks 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, through business rates.