Crackdown on second-home owners holiday home loophole

Levelling Up Secretary Michael Gove launches a tax crackdown on second-home owners who ‘pretend’ to let their properties out to holidaymakers

  • Michael Gove is threatening to hit second-home owners with new bills 
  • Levelling Up Secretary wants to stop people abusing holiday home tax loophole
  • Under current rules second home owners can paying council tax by qualifying as small businesses as well as receiving business rates relief

Second-home owners who ‘pretend’ to let their properties out to holidaymakers face a tax crackdown from Levelling Up Secretary Michael Gove.

The Mail on Sunday can reveal Mr Gove is threatening to hit them with new bills which could run to over £1,000 a year, to stop them abusing a tax loophole.

His officials say the crackdown will benefit destinations including the Lake District, Devon and Cornwall by encouraging tourism.

Under current rules, second-home owners in England can avoid paying council tax by saying they intend to let their properties out to other holidaymakers and so qualify as small businesses.

Levelling Up Secretary Michael Gove is threatening to hit them with new bills which could run to over £1,000 a year, to stop them abusing a tax loophole

However, the vast majority of the 65,000 such ‘holiday lets’ in England can also then benefit from business rates relief of 100 per cent depending on the properties’ value.

The Department for Levelling Up, Housing and Communities (DLUHC) also says that there is currently ‘no requirement’ to produce evidence that a second home has actually been let out – not just left empty.

But in a tax change set for April next year, home owners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead.

As Mr Gove’s officials pointed out yesterday, the move would protect ‘genuine’ small holiday letting businesses and ensure second-home owners paid a ‘fair’ contribution towards public services.

Mr Gove’s plans come after a consultation launched in 2018 and threats last year by the Treasury to close the loophole.

But in a tax change set for April next year, home owners will have to prove they are let for at least 70 days a year or be forced to pay council tax instead. Pictured: St Ives is one the England’s most sought-after second home towns, according to a study by Lakeshore Leisure Group

According to reports, the number of holiday lets in England has been increasing year on year from 50,960 in 2019 to 65,000 now.

The Covid pandemic is said to have fuelled the trend, as London and other city dwellers sought to escape to the countryside.

But the move has also been branded ‘an easy way to save on tax’ as any property with a rateable value of £12,000 or less is effectively exempt from paying business rates.

DLUHC officials confirmed yesterday that 97 per cent of the existing 65,000 holiday lets fell into that category.

Last week, North Devon Tory MP Selaine Saxby suggested the surge in second homes in her area was ‘unsustainable’. She told the Commons: ‘The time is now to address the imbalances in the housing market, before the lights go out.’

Liberal Democrat MP Tim Farron, whose seat covers much of the Lake District, said that in the area ‘the majority of properties are now empty for most of the year’.

Levelling Up Minister Chris Pincher replied: ‘We have committed to close the loophole in the business rate system.’

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