The tariff loophole for secondary residences will be eliminated
New measures have been announced to target owners of second homes abusing a tax loophole that allowed them to claim their properties are vacation rentals, despite often being empty.
Those who take advantage of the system to avoid paying their fair share of council tax in popular tourist destinations including the Lake District, Cornwall and Devon will be targeted under new rules announced today by the Department for Leveling Up, Housing and Communities (DLUHC).
Under current legislation, those who own a second home in England can avoid paying council tax and, by declaring their intention to let the property to holidaymakers, can access business rate relief for small businesses.
The government has held a consultation on the legislation and will now pass changes to the tax system which will see second home owners pay council tax if their properties are not genuine holiday rentals.
Vacation rental owners will now need to provide evidence, including brochures or websites used to advertise the property, in order to qualify for business rate relief.
Communities Secretary Michael Gove said: “The Government is supporting small businesses, including responsible short-term rentals, which attract tourists and bring significant investment to local communities.
“The action we are taking will create a fairer system, ensuring that second home owners contribute their share to the local services they benefit from.”
South Hams DC leader Judy Pearce (Con), who is believed to have a large number of people taking advantage of the tax loophole, told LGC that closing the loophole was a “matter of community cohesion”.
“A lot of people in the area resent people they already consider wealthy because they have a second home, they move in and they don’t pay housing tax.
“But it’s the locals who have to foot the bill for things like emptying bins, cleaning public toilets, when it’s really its holidaymakers who are the majority users of all those things,” Cllr Pearce said.
She added that in financial terms as a district council the change will make a ‘small but not huge difference’ but will have a real impact on the county council which will ‘grab its share of county council, which he gets nothing at the moment”. .”
“I would like to charge a 200% council tax for second homes – non-resident owners. But at the moment we would need government legislation to be able to do that, so it’s not planned at the moment .”
Cllr Hams also stressed that this was “just the first step” taken by the government “to ensure that second home owners contribute to the local economy”.
Shaun Davies (Lab), chairman of the Local Government Association (LGA) resources council, said of the changes: ‘Genuine small businesses, including vacation rentals, should be eligible for relief small business tariffs, but we have warned that the current criteria are open to abuse.
“We are pleased that the government has listened to the advice and is taking action to prevent property owners who are not genuine businesses from exploiting the rules.”