The government has launched a consultation on the business rates treatment of self-catering accommodation.
There is a concern that some second home owners are valuing their properties for business rates by declaring their property as holiday accommodation and so qualifying for small business rate relief, which can reduce a property’s tax liability to zero if it has a rateable value of £12,000 or less.
The government states that of the approximately 47,000 holiday lets in England liable for business rates, around 96 per cent come under this significant rateable value figure.
Because of this loophole, the state believes that English councils are losing out on “millions” in lost council tax, which does not have to be paid in lieu of business rate payment.
The consultation, which seeks views on how the government could “strengthen the criteria for a holiday let to be liable for business rates” will run until 16 January 2019.
Local government minister Rishi Sunak says: “We’re aware of concerns that the current arrangements for valuing second homes for business rates and claiming relief, do not provide strong enough protections against abuse.
“We are seeking views on whether we should strengthen the checks already in place to ensure second-home owners have to pay council tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.”
Mortgages for Business sales director Steve Olejnik adds: “If the government is proposing to close a loophole to stop people abusing the rules then we are in favour.”