New rules to end second home tax loophole

Multiple homeowners who leave “holiday lets” empty will no longer be able to claim tax benefits, it has been announced.

The move ends a loophole allowing owners of second homes to avoid paying their “fair share of tax”.

Under the current system, owners of second homes in England can avoid paying council tax and access 100 per cent small business rate relief by declaring an intention to let the property out to holidaymakers.

But following concerns that some properties are never used by holidaymakers and simply left empty, the Government will introduce “tough new measures”.

The new rules – which come into force from April 2023 – mean that holiday lets must be rented out for a minimum of 70 days a year to qualify for small business rate relief and council tax exemption.

To claim relief, holiday let owners will also be asked to provide evidence of business activity – such as letting details, receipts, and the website or brochure used to advertise the property.

In addition, properties must be available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days in the coming year to qualify for relief, and:

• during the previous year, it was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days
• during the previous year, it was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days.

It means that the new rules will take into account marketing and letting activity from 01 April 2022.

According to the latest statistics, around 65,000 holiday lets in England are liable for businesses rates.

Commenting on the changes, Secretary of State for Levelling Up, Michael Gove, said: “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.”

Kurt Jansen, Director of the Tourism Alliance added: “Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes a very important distinction between commercial self-catering businesses that provide revenue and employment for local communities, and holiday homes which lie vacant for most of the year.”

For further information on the new rules around the taxation of second homes and all other aspects of personal tax, please contact Chris Moir, head of personal tax at RMT Accountants & Business Advisors, on 0191 256 9500 or via the contact us form