Pressure increases to end holiday cottage tax loophole abuse

Councillor David Beavan - he believes Southwold is oversaturated with the number of second homes throughout the town...

Councillor David Beavan - he believes Southwold is oversaturated with the number of second homes throughout the town Picture: SARAH LUCY BROWN - Credit: Archant

Community leaders say they are putting pressure on government to close a loophole allowing second homeowners to get tax relief without letting their properties to holidaymakers. 

East Suffolk Council say it is working with authorities in Devon, Cornwall, Norfolk, Durham and Warwickshire to get chancellor Rishi Sunak to strengthen the rules.

David Beavan, town and district councillor for Southwold, suspects some residents with second homes in the coastal resort have fraudulently registered their properties as a cottage-to-let business.

He says there is an "unjust loophole" that could potentially allow second homeowners tax relief and this "foments real resentment and division in our communities".

He said: "They just tick the box to say they are available and they don't have to let at all."

If properties are registered as a business, they could be entitled to tax relief - but also government grants are available for cottage businesses that have been unable to welcome visitors during Covid.

Maurice Cook, cabinet member for resources at East Suffolk, said it still remained the case that second home owners could register their property as a holiday let and pay no council tax - the property needs to be available for let for a minimum of 140 days a year.

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He said: "However, there is a significant difference between being available to let and being actually let."

Such properties in the non-domestic valuation list are eligible for small business rate relief providing the rateable valuation is less than £15,000 and the ratepayer only occupies one property.

Mr Cook said after raising the matter with the Local Government Association, the council was able to join with other local authorities to make further representations to ministers and local MPs. He said the council had asked for more effective targeting of tax relief to help genuinely effected businesses by excluding single property holiday lets from small business rates relief.

He said: "The current system enables the owners of these properties to avoid making any financial contribution to local government in the areas that they are situated."

Government officials say a consultation has been held on the issue and action is being considered. Mr Sunak has already acknowledged there is a "business lets loophole" which needs closing to prevent potential abuse.

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