In its submission to the Office of the Deputy Prime Minister, the CRC admitted “it would be wrong to blame the incidence of second homes for the housing problems in rural areas”. But it went on to say that “there is no doubt that in highly pressurised areas, they can have a severe impact on the local community, both on the availability of housing and on the viability of services”. There is a need for “a local tax where levels of second home ownership have a negative impact on the local economy”.
According to the Centre for Future Studies, 298,000 families own second homes in England, with 26,000 owning homes on Scotland or Wales. Rural areas, especially the South-West which has 27% of second homes, are popular. It is estimated that by 2015 that more than 405,000 Britons will own second homes, a rise of 24% in 10 years. The proposals would require a national register of second homes and could introduce a business tax on homes. It is understood the recommendations are being considered as part of Sir Michael Lyons’ review of the balance of funding between central and local government. Two years ago the government ended the 50% tax relief for those who leave their second homes vacant for most of the year. Many councils now charge the full 90%. This has raised 87.5m, but only 46m was raised by rural authorities. Owners are supposed to inform local authorities if their house is a second home and sales of these houses are subject to a 40% Capital Gains Tax. But there have been claims that second home owners are exploiting a legal loophole to avoid paying Council Tax. Liberal Democrat MP Matthew Taylor says owners are registering their properties as small businesses. He claims that by filling in a government form they can convert to paying business rates and claim rate relief of up to 50% instead of registering for Council Tax and receiving only a 10% discount. A national register would prevent this and higher taxes on second homes would be an attractive policy option for a cash-strapped government.Labour may tax second home owners
The government could be planning a tax on second home owners as part of its review of local government financing. There is concern about the lack of affordable housing and rising house prices, especially in rural areas. To combat this, the Commission for Rural Communities has called for Council Tax on second homes to be treated as a “separate taxation resource” to help fund low cost homes.
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