Tax relief loophole closes as Gove targets holiday homes

MICHAEL GOVE has pledged to crackdown on “privileged” second home owners who abuse the tax system, as he moved to close a holiday letting loophole.

The Levelling Up Secretary said his measures on tax relief for holiday rents would target second home owners who pretended to let out their property, but in fact leave them empty.

Under new rules, announced today, second home owners will only be able to register for business rates if they can prove they let their properties for at least 70 days in a year.

At present they are allowed to pay business rates, which are cheaper than council tax, if they make their property available for letting for 140 days a year. Currently there is no requirement for evidence to be produced that a property has actually been commercially let out.

The move could cost second home owners more than £1,000 a year and follows criticism that second homes and holiday lets – fuelled by the growing demand for staycations and a surge in people escaping from home working in cities – have priced out local people from buying in their communities.

Mr 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.

“The action we are taking will create a fairer system, ensuring that second home owners are contributing their share to the local services.”

The number of holiday lets in England has increased from 50,960 in 2019 to 65,000 now, with properties with a rateable value of £12,000 or less effectively exempt from paying business rates. Some 97 per cent of holiday lets fall into that category.

Kurt Jansen, director of the Tourism Alliance said: “Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes an important distinction between commercial self-catering businesses that provide revenue and employment, and holiday homes that lie vacant for most of the year.

“It is recognition that tourism is the lifeblood of many small towns and villages, maintaining the viability of local shops, pubs and attractions.”