A loophole that allows second homeowners to wriggle out of both business rates and council tax on a furnished holiday let property will close, as from April 2023.
Landlords will have to prove holiday lets are being rented out for a minimum of 70 days a year to access Small Business Rates Relief (SBRR), where they meet the criteria. Holiday let owners will also have to provide evidence such as a website or brochure that advertises the property, as well as letting details and receipts.
Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.
The tax changes announced by levelling up Secretary of State Michael Gove only applies in England and they follow a consultation in 2018 and a mention in last year’s budget. It will bring England more in line with Welsh rating rules but Scotland is also bringing in its own changes, as from April this year.
The tax loophole described in Gove’s recent announcement came about from changes to SBRR brought in by previous Chancellor George Osborne.
Under the new rules in England, a property will now be assessed for business rates, not council tax, only if the owner can provide evidence that:
a) It will be available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days in the year after the day in question
b) During the previous year, it was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days
c) During the previous year, it was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days.
Said Gove: “The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.
“However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.”
There are no special rules for landlords with multiple units in one location and the rules will only apply to buildings (or self-contained parts of buildings) that would otherwise be assessed for Council Tax. This translates so, caravans, shepherds huts or similar units won’t generally be subject to the new rules as they are assessed for business rates separately.
You can see Gove’s announcement here: Gove closes tax loophole on second homes – GOV.UK (www.gov.uk)