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Government to review second home tax rules

Words: Laura Edgar
Light bulb with tax written on it

The government is going to consult on a business rates ‘loophole’ that it says could be costing councils in England millions in lost council tax.

Second homeowners pay council tax on their properties, including when the property is available to rent infrequently during the year. Properties are valued for business rates when owners declare their property is let as holiday accommodation for 140 days or more a year.

Any property registered for business rates rather than council tax is likely to qualify for small business rates relief. Providing 100 per cent relief, no tax is due on properties with a rateable value of £12,000 or less.  

The government explained there are about 47,000 holiday lets in England that are liable for business rates, 96 per cent of which have a rateable value of £12,000 or less. Currently, it is not necessary to provide evidence on whether a property has been commercially let.

The local government minister said the government is aware of concern that owners of second homes are exploiting the system by not paying council tax.  

Rishi Sunak said: “We are seeking views on whether we should strengthen the checks already in place to ensure second homeowners have to pay council tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.

“The consultation will seek views on whether the current criteria should be strengthened to ensure that second homeowners are contributing to the local economy through the proper payment of council tax, or, for those genuinely renting out their property and supporting tourism, business rates.”

The consultation, which runs until 16 January 2019, can be viewed on the UK Government website.

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