However, Carol Lewis writing for the Sunday Times newspaper thinks that holiday let owners should be paying council tax.
“Given that levelling up is the government’s buzzword du jour, it is time to level the playing field and bring holiday-home owners in line with everyone else,” she argues.
Lewis thinks there are thousands of holiday-let owners who have benefited from council tax exemption, business rates relief and have had access to “generous government grants” during the Covid pandemic.
Business Rates Relief
She quotes Colliers figures in her argument for this that local authorities across England and Wales have lost around £110 million per year because of business rates relief given to holiday let owners, money Ms Lewis argues, that could have been used to “help level up the property markets between second-home owners and residents.”
The difference between a vanilla buy-to-let business and a holiday let business is that HMRC view the former as generating investment income (unearned income) whereas the holiday let business, in HMRC’s eye is a true business generating business income. That would seem to make sense because there is far more hands on work in involved in running holiday lets.
There are undoubtedly certain tax advantages to having your landording business classed as a pure business as opposed to an investment, and HMRC says:
Self-catering and holiday let accommodation is classed as a true business if the property is in England and available to let for short periods that total 140 days or more per year; it will be rated as a self-catering property and valued for business rates.
If your property is in Wales it will be rated as a self-catering property and valued for business rates if it’s both: (1) available to let for short periods that total 140 days or more per year and (2) actually let for 70 days. There are different rules in Scotland.
The Valuation Office which is a part of HMRC will work out the rateable value of the property based on its type, size, location, quality and how much income you’re likely to make from letting it.
If as a holiday let landlord you only let one property and its rateable value is less than £15,000 you may be eligible for small business rate relief.
According to Lewis there are 67,578 registered holiday lets in England and she says that 96 per cent of these claim business rates relief based on figures obtained from business tax specialist Altus Group. By definition, these holiday lets are not liable to pay council tax, and the concession on business rates allows them to pay reduced business rates.
During the Covid lockdown restrictions hospitality businesses, and holiday lets come under this broad umbrella term, were able to take advantage of the government’s Covid grants – landlords were paid for leaving their premises empty during lockdowns. Altus estimates that 11,476 second homes in England changed their registered status from a second home to commercial holiday premise since the start of the pandemic.
It has been reported widely in the media and Lewis highlights this fact, that Cornish locals are finding it very difficult to find somewhere to rent long-term when the county is seeing a steep increase in second home ownership.
Something of a buying frenzy has been going on during the pandemic as people realised the benefits of having a city escape and that work from home could be in a pleasant place such as Cornwall just as easily as in Camberwell.
Lewis cites a recent Cornish council meeting where councillors were told that 7,440 holiday lets in the county had benefited from small business rates relief and Covid grants amounting to just under £170 million, £104 million of which was paid to owners who live outside Cornwall. This she says must be galling to those would be local renters who are bing priced-out.
Apparently the chancellor has pledged to make it more difficult for holiday-let owners to claim business tax relief, but so far claims Lewis, nothing has been done. Why she asks? Is it because MPs own holiday homes she wonders?
“They and their tenants make use of the services it funds — from fire services to waste collection, and road maintenance to sports centres. The stamp duty holiday is over and furlough has finished. With stagflation looming and households facing spiralling bills, it is time to act and close this loophole,” says Carol Lewis.