Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under tough new measures announced by the Government.

The changes will target people who take advantage of the tax system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, East Anglia, West Sussex and the Isle of Wight.

Currently, owners of second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers. However, concerns have been raised that many never actually let their homes, leave them empty and are unfairly benefiting from the tax break.

Following a consultation exercise last year, the Government is to change the tax system, so that second homeowners must pay council tax if their properties are not genuine holiday lets.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or a copy of the brochure used to advertise the property, letting details and receipts. Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Secretary of State for Levelling Up Michael Gove said:

“The Government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.

“The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

Kurt Jansen, Director of the Tourism Alliance said:

“Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes a very important distinction between commercial self-catering businesses that provide revenue and employment for local communities, and holiday homes which lie vacant for most of the year.

“It is recognition that tourism is the lifeblood of many small towns and villages, maintaining the viability of local shops, pubs and attractions. The move will protect genuine small holiday letting businesses across the country and will support local economies by encouraging tourism and by ensuring second homeowners pay a fair contribution towards public services.”

Around 65,000 holiday lets in England are liable for business rates of which around 97 per cent have rateable values of up to £12,000. Currently there is no requirement for evidence to be produced that a property has actually been commercially let out.

The Valuation Office Agency will be responsible for determining whether a property should be assessed for council tax or business rates under this new system.

By Patrick Mooney, Editor