Tax Loophole on Second Homes Closes

Second homeowners taking advantage of a small tax loophole by claiming their often-empty property is a holiday let will be forced to pay under new measures.

Under current rules, owners of second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers. However, concerns have been raised that many never actually let the property and leave it empty and so, are unfairly benefiting from the tax break. HMRC has issued a press release stating that those who "abuse" the loophole.

There are around 65,000 holiday lets in England. Many of these properties are likely to qualify for small business rate relief, which provides 100% relief from business rates – meaning no tax is due – on properties with a rateable value of £12,000 or less, provided the business uses only one property. For properties with a rateable value of £12,001 to £15,000, the rate of relief decreases gradually from 100% to 0%.

Changes will be made to the tax system which will mean second homeowners must pay council tax if the property is not a genuine holiday let.

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year and are available to be rented out for 140 days a year to benefit from small business rates relief.

Property owners will also have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

The wording in the press release is desperate, "homeowners who leave properties empty while pretending to let them...". This rhetoric that the wealthy are nothing more than tax avoiders is becoming tiresome. Most fortunate enough to own a second home used solely for personal holidays would not even think to pretend.

Others, perhaps retirees who need to supplement their income with a genuine intention to let (but perhaps have struggled to understandably over the last few year) will be the ones to lose out. The few who actually pretend wont be put off that pretence by websites and brochures.

The press release includes a comment by Secretary of State for Levelling Up Michael Gove, "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."

Meanwhile in related news, as we see energy prices soar, MPs are permitted to claim expenses on energy bills....for their second homes.