Finance News

Tax Clampdown Threatened for Owners of Second Homes

Rose Jinks - November 9, 2018

Tax rules concerning owners of second homes being valued for business rates, rather than Council Tax, could be clamped down on by the Government.

A new consultation has launched on the plans, detailing the Government’s attempts to close a tax loophole being exploited by the owners of second homes.

Currently, if an owner declares that their property is available for holiday lets, then they can receive favourable tax treatment. However, they do not have to prove that the property is actually let, or even whether it was marketed for letting.

Tax Clampdown Threatened for Owners of Second Homes

Tax Clampdown Threatened for Owners of Second Homes

Holiday lets on business rates are likely to qualify for Small Business Rate Relief, which provides 100% relief on business rates, meaning that no tax is due on properties with a rateable value of £12,000 or less.

For properties with a rateable value of £12,001-£15,000, the rate of relief drops gradually, from 100% to 0%.

To qualify, the property must be available for letting for short periods totalling at least 140 days per year.

As of April this year, 47,000 holiday lets in England were liable for business rates, of which 96% qualified for relief, having rateable values of £12,000 or less.

However, the Government is concerned that some owners of second homes are gaming the system.

In a new consultation, the Government is proposing to toughen up the 140-day rule.

It suggests that, to qualify for business rates, in the previous year, the property must have been available for at least 140 days and actually have been let for short periods totalling at least 70 days.

Local Government Minister Rishi Sunak says: “We’re aware of concerns that the current arrangements for valuing second homes for business rates and claiming relief do not provide strong enough protections against abuse.

“We are seeking views on whether we should strengthen the checks already in place to ensure second home owners have to pay Council Tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.”

The consultation, which can be accessed here, will run until 16th January 2019.

Would you be affected by this tax clampdown?