Holiday homes owners are exploiting a loophole to avoid council tax and business rates on their properties.
Thousands of homes nationwide have been switched from second homes to holiday lets.
Cash-strapped councils are complaining that although the move is perfectly legal, it’s wrong and property owners should pay up the cash.
The result of making the property a holiday let is a raft of tax benefits – from 10% entrepreneur relief on the sale of a holiday home, to income tax breaks on maintaining or improving a property.
The rules also say as business premises, a holiday let is exempt from council tax and instead qualifies for business rates.
However, business rates are charged at a lower level than council tax, and in some cases discounts and government tax breaks aimed at encouraging new businesses mean they have nothing to pay.
The tax loophole has been revealed by councils in Devon and Cornwall – favourite destinations for second homers.
Converting a home to a property let means meeting some strict qualifications, but pays off in tax benefits.
The qualifications include having the property available as a commercial let for 210 days a year, let for 105 days.
Councillor Alex Folkes, Cornwall Council cabinet member for finance and resources, explained more than 1,000 second homes had converted to holiday lets, depriving the council of £1.5 million of income a year.
“Clearly if this is something that is being done to avoid paying taxes it is a concern. We will have to look into it and see what we as Cornwall Council can do to ensure people are paying the tax for which they are liable,” he said.
“If someone is claiming their property is a rental property and is exempt by the low level of income we would went to see proof they are genuinely a rental property. If 1,000 properties have done this, it is over a million pounds we are missing out on. We will look to have a conversation with ministers as soon as possible. It is tax avoidance and while it is legal, it is wrong.”