UK government examining holiday home loophole

UK: The government is looking into a tax loophole that allows owners of holiday homes to avoid paying council tax and business rates.

The home owners can convert the properties to business use and enjoy small business rate relief to avoid both charges.

Conservative MP for St Austell and Newquay Steve Double, speaking at recent Prime Minsters Questions, said: Speaking to the Commons, Steve Double said: “Holiday homes in Cornwall are a mixed blessing, they provide important support to our local economy but they also take up vitally needed housing stock and push up prices beyond the reach of many local people. In addition to that, many of them avoid paying council tax by switching to business use and then enjoying the benefits of small business rate relief. Does my right honourable friend agree with me that this situation is unacceptable, and would he use his good offices to help the government close this loophole?”

Minister Rishi Sunak acknowledged there was “scope for ambiguity” and said the situation was being investigated.

Reclassifying a second home as a rental holiday home means owners no longer need to pay council tax. They need only pay business rates if the rental income exceeds a certain level – otherwise they qualify for rate relief.

Cornwall Council’s Cornelius Olivier said the council could collect an additional £10 million in taxes if the system was changed.

According to the 2011 Census, more than 165,000 people in the UK have a second home for holidays.

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