Tax Loophole Closed on Second Homes

New measures have been introduced by the Government to prevent the owners of second homes claiming their properties are holiday lets.

The changes to the tax system target those who take advantage of the current rules to avoid paying council tax and to access small business rates relief by declaring an intention to let the property out to holidaymakers.

The new measures

From 1 April 2023, a property will only be assessed for business rates, rather than council tax, if the owner can provide documentation that it

• Was actually let commercially, as self catering accommodation, for short periods totalling at least 70 days in the previous year;
• Will be available for letting commercially, as self catering accommodation, for short periods totalling at least 140 days in the coming year; and
• Was available for letting commercially, as self catering accommodation, for short periods totalling at least 140 days in the previous year.

Evidence will be required to verify the property’s status as a holiday let – this will include visibility of the website or brochure used to advertise the property, letting details and receipts.

Around 65,000 holiday lets in England are liable for business rates of which around 97% 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.