Second home owners that make their properties available for holiday rentals are being targeted under new rules outlined by the Levelling Up Secretary, Michael Gove. The change to the rules will specifically target those whose second homes are registered for business rates as they are let out for holiday rentals.
By identifying the property as a lettings property, rather than a main residence, owners can avoid paying council tax and instead register for business rates. They can then in turn claim small business rates relief, in some cases meaning they end up paying no rates at all. However, it is suggested that that some owners are using this loop hole but not using the property for lettings, either using it purely as a second home, or simply leaving it empty.
West Sussex homes under the spotlight
The new rules, which are set to come into force in April 2023, will mean those hoping to register for business rates have to prove that they let their properties for at least 70 days in a year. At present they are allowed to pay business rates if they make their property ‘available for letting’ for 140 days a year but are not required to evidence the fact. In addition to proving lettings, the availability clause will remain and owners will need to prove that the house is available for 140 days a year and successfully let for 70 of those days, to access the relief.
In announcing the changes on 14th January, Mr Gove was clear that they are targeting people who take advantage of the system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.
Providing evidence of holiday lettings
In order to qualify for small business rates relief on holiday letting second homes the property owners will have to provide evidence as part of the application process. Evidence will consist of a mix of marketing materials such as the website or brochure used to advertise the property and letting details and receipts.
Mr Gove explained that this was not about targeting those small business owners that legitimately let second or multiple homes for holiday rentals. It is those using a loophole for purely financial gain and who enjoy the benefits of the local services without making a fair contribution.