Holiday home ‘loophole costs council £1m every year’
CRISIS ‘CHANGING NATURE OF OUR COMMUNITIES’
AMUCH- CRITICISED holiday home tax “loophole” is costing Anglesey Council as much as £1m a year, it is claimed, with concerns that “ordinary estate homes” are being snapped up as investments and causing unrest by being let out for “noisy hen weekends.”
The authority has urged the Welsh Government to take action on second homes, including major changes to both planning and taxation systems.
Welsh Revenue Authority figures for 2019/20 show 36% of residential transactions on Anglesey were charged at the higher rates of Land Transaction Tax (LTT), with the majority thought to be second homes and buy-to-lets.
In 2017, the council became one of the first to introduce a second-home levy, with some of the 25% premium helping first-time buyers.
It was later increased to 35%, second only to Gwynedd which charges a 50% premium.
But according to the island’s MS, a tax “loophole” is costing the council as much as £1m a year – the equivalent of a 3% annual council tax rise.
According to StatsWales 2,112 properties on the island are paying the second homes premium, but a council report also points to a “continued erosion of the tax base” due to selfcatering properties switching from domestic to business rates.
Proponents claim self-catering lets contribute to the local economy, but the WLGA says the practice represents an annual loss of around £4.5m.
Second-home owners designating their homes as businesses means they pay no local taxes, as long as their holiday home is let for 70 days a year and available to let for 140 days.
But as small businesses, many are also exempt from paying business rates.
With councils also often having to refund backdated applications, councillors were told there had been a “steady flow” of applications to transfer, with officers also noting a trend of “regular estate homes” being snapped up as investments to be let out.
Since March 2020 alone over 100 homes have or are in the process of “switching over”, itself expected to result in almost £200,000 of lost income for Anglesey Council.
But there have long been calls on the Welsh Government to close the “loophole”, with a recent Senedd debate on holiday homes receiving some support from members across the political divide.
Labour MS Mike Hedges claimed small business tax relief should not be available on properties that have been used previously or built for residential use, adding: “If it was built as a residential property, that’s what it should be.”
The island’s Plaid Cymru MS, Rhun ap Iorwerth called for a cap on the number of second homes, describing the situation as a “crisis” and “changing the nature of communities.”
He added: “The threshold for change of use is far too low and costs as much as £1m per annum for a council like Anglesey, and it has to stop. It’s as simple as that.
“It’s a disgrace that the Government has refused to acknowledge the problem.”
Meanwhile, concerns have also been raised that investors are “snapping up” properties on the island and letting them out, which one councillor said was causing community unrest as well as reducing housing stock and impacting property prices.
Cllr Carwyn Jones said that small business grants during the pandemic had “opened the eyes” of some to explore the issue and “take advantage.”
“These aren’t really businesses but means we receive no tax income, and yet they still place significant pressure on our services,” said Cllr Jones, during Monday’s Executive meeting.
“I’ve received several calls about people letting out housing estate properties with complaints that hen nights were being held and playing loud music into the early hours.
“This isn’t right, in the middle of residential homes, and the Welsh Government really need to get a grip.”