The current rules say that owners of second homes in England are usually liable for council tax, even if they carry out some short term letting. However, if the property is considered to be predominantly self-catering accommodation, then it could be valued for non-domestic rates instead.
"There are around 65,000 holiday lets in England!"
Many of these properties would qualify for small business rates relief, which is a 100% relief from business rates, so no tax is due when the property has a rateable value of £12,000 or less, providing the owner only has one property to let. This relief tapers off depending on the value of the property.
The Government encourages holiday lets as it brings tourism and other local economic benefits, however, it is concerned that property owners are simply trying to reduce their tax liability by saying the property is available for letting, without actually letting it out.
Tough new measures are coming into force in April 2023 as they want to create a fairer system that will ensure second homeowners will contribute to the local services they are using so changes to the tax system are on their way.
From April 2023, properties will only be assessed for business rates rather than council tax if the owner can prove that:
The property is available for letting for at least 140 days in the following year
For the previous year, it was available for at least 140 days as well
In the previous year, it was actually let for a minimum of 70 days
Evidence such as websites, brochures and receipts will be needed!
I feel these changes are quite fair and will only target those second property owners who attempt to take advantage of the tax system to avoid contributing to the local area by paying council tax.
Popular destinations such as Cornwall, the Lakes and the Isles of Scilly are heavily populated by second homes and closing this tax loophole will go a long way to helping the local economies of these areas.
Until next time ...
ROGER EDDOWES Business Godparent
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Roger trained at Edward Thomas Peirson & Sons in Market Harborough before working at Hartwell & Co, followed by Chancery, as a partner. He started Essendon Accounts and Tax with Helen Beaumont in 2014 as a general practitioner with a hands-on approach.
Roger loves getting his hands dirty, working with emerging, small-to-medium and family businesses to ensure they receive the best possible accountancy advice. Roger utilises an extensive network of business contacts to leverage the best guidance and practical solutions.
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