Suffolk campaigners call for an end to the ‘scandal’ of second home tax avoidance loopholes
PUBLISHED: 11:00 11 April 2018
A minority of Suffolk second-home owners are claimed to be “robbing the public purse” by abusing a loophole to avoid tax.
Campaigners warn growing numbers of second-home owners are registering properties as holiday-lets and claiming small business rate relief to dodge tax.
The loophole, which is said to be costing councils millions in lost income, has provoked national outcry and calls for a crackdown.
In Cornwall, which has the UK’s highest concentration of second homes, councillors are trying to take devolved powers to end the practice. Second home ownership is almost as high in parts of East Suffolk, especially coastal communities such as Southwold, Aldeburgh and Walberswick where more than a third of residential properties are registered as second homes.
While most second home owners pay council tax, like any other resident, critics have pointed to government figures showing many in coastal areas of Suffolk are now registered as holiday accommodation.
To qualify as a holiday let there is no requirement to be let out to tourists - only “available to let” for 140 days a year – which could mean as little as a window advert.
And as long as the property’s rateable value is less than £12,000, owners can get 100pc rate relief - meaning they pay no tax on it.
In Southwold, campaigner David Beavan, found 354 small businesses were claiming relief last year, of which 263 were second home holiday lets. All the second home businesses were claimed to have qualified for rate relief, amounting to £551,744.
Separate research by the EADT found 190 of the 387 businesses registered in Aldeburgh’s IP15 post code area were holiday lets.
While many may genuinely be let out, Mr Beavan has criticised the loose criteria required to register a holiday business and the ease of claiming rate relief.
He said he was “trying to expose a scandal” that was costing the council around £500,000 a year.
“We are not against second home owners, many of whom elect to pay council tax,” he added.
“But we think it is unfair that people who can afford two homes are subsidised by people who can’t afford one home. The rate relief is there to help struggling businesses, but the recent rate revaluation has put most small shops above the ceiling.”
Mr Beavan, a Liberal Democrat, has been working with the party’s East Suffolk branch to campaign for change.
Branch vice chairman Jon James said: “Many second home owners do pay council tax, contribute to community life and hold the property as part of their future retirement portfolio and intend to live in the area.
“We do also recognise that the local tourist economy requires a high level of accommodation especially catering for families.
“However we believe that the system is not fair to many small businesses, who are not getting the rate relief or to the community who miss out on the council tax.”
In a letter to Suffolk Coastal MP, Therese Coffey, the branch called for the criteria to be brought in line with “furnished holiday lets”, which must be actually rented for 105 days each year. “We welcome visitors to our local towns and they are vital to our economy, but ask them to pay their fair share,” the letter continued. “East Suffolk Liberal Democrats are pressing for this tax loophole to be closed.”
Dr Coffey said she was aware of the issue had raised it with ministers previously, most recently when with Southwold’s deputy mayor Melanie Tucker. “I look forward to receiving the representation from constituents on this matter,” she added.
Christopher Hudson, who has previously raised concerns about the effect of second homes on Suffolk communities, said the system was a “dog’s breakfast”. “If this is some sort of wheeze to get around paying tax, we should be seeing through it,” he added.
“Local authorities are being taken to the cleaners by people who are effectively robbing the public purse.”
A spokesman for Suffolk Coastal and Waveney district councils said “we have a zero tolerance policy towards fraud” and a corporate fraud team investigated any suspected case. “It is a criminal offence to avoid paying council tax by fraudulently giving false information to the council, or by not telling the council about any changes that might affect how much council tax is due,” he added. “This includes giving false information to claim a discount, exemption or other reduction. Where fraud is proven the council will take action against the person committing fraud.”
People with information can contact the fraud hotline email address or call 01394 444444.
How does the system work?
Properties available to let at least 140 days a year are classed “self-catering” and valued for business rates.
The Valuation Office Agency determines the rateable value based on the property type, size and location. If a property’s rateable value is less than £12,000 the owner is entitled to 100pc rate relief;
As most holiday homes have a rateable value of less than £12,000 very few owners pay any business rates. And as they are classed as businesses, they pay no council tax either.
The Liberal Democrats want to change the requirement for self-catering businesses to be brought in line with “furnished holiday lets”, which must be available to let for 210 days a year and actually let for 105 of those.
East Suffolk councils have no role in permitting second homes to be reclassified,
They say the owner would need to satisfy the VOA that the property is available to let and this could involve a notice in a window or website advert