Some holiday lets owners are ‘gaming’ the system to claim business rate relief, comments made by the Housing Minister Lord Greenhalgh suggest, who has promised action to clamp down on the practice.
In a Lords’ debate on second homes, peers voiced concerns that second homeowners were advertising properties as holiday rentals and avoiding council tax by registering for business rates, thereby qualifying for small business rate relief.
Shadow housing spokesperson Lord Kennedy of Southwark said this meant owners can pay very little tax and suggested a larger levy to encourage landlords to rent to tenants instead.
Lord Greenhalgh (main pic) said it was approaching this issue by, “ensuring that people do not game the system”.
He added: “The government will legislate to require that holiday rentals meet an actual letting threshold before being assessed for business rates. This will ensure that only genuine holiday businesses can access the rate relief for small businesses. We have not yet finalised what that threshold will be.”
Under the current rules on holiday lets for business rates, a property in England is rated as self-catering and valued for business rates if it’s available to let for short periods of 140 days or more each year.
If a property’s rateable value is less than £15,000, owners may be eligible for small business rate relief. The minister also confirmed that he is still considering a registration system for holiday lets.
The Short Term Accommodation Association believes the business rates rules for holiday lets in England should apply at the threshold of 140 nights let. “We think this would result in more tax being collected across the UK, since increasing the threshold would mean fewer operators qualifying for small business rates relief than would be the case under a 70-night threshold,” says chair Merilee Karr (pictured).
She adds: “Only genuine, year-round businesses should be paying business rates and everyone else should be contributing to their local community via council tax.”