THE UK Government’s plan to tighten a loophole enabling second home and holiday let owners in England to avoid paying council tax should prompt ministers in Wales to also take further action, it has been claimed.
The issue of second homes has become particularly prevalent in communities across rural and coastal Wales over recent years, with holiday properties and holiday lets now making up over 10% of Gwynedd’s entire housing stock.
But while the Welsh Government has been urged to act, with a recently commissioned report outlining 12 potential steps to reduce the pressure on the local housing market, any potential for action has been halted until after May’s Senedd Election.
Gwynedd Council has already decided to lodge the maximum permitted premium of 100% on second homes in the county – essentially doubling what would be paid in council tax if it were a normal dwelling – although most others have resisted following suit due to fears it could prompt more of their owners to ‘flip.’
Under current legislation people can avoid paying council tax on their properties by registering them as businesses and then state that they do not earn enough as holiday let businesses to require them paying business rates – thus making no direct contribution towards local services in the areas where they own properties.
But the Welsh guidelines are already tighter than those over Offa’s Dyke, however, with it being understood that the UK Government’s proposals would see regulations fall along similar lines to those in place here.
In England a holiday let is currently liable to pay business rates rather than council tax when the owner declares they intend to make their property available to let for at least 140 days in the coming year.
But there is no requirement for business rates purposes to undertake checks to verify that they are actually commercially rented out.
In Wales, however, there is an added compulsion for the property to actually be let out for 70 days for it to meet eligibility criteria.
According to Whitehall, of the over 60,000 holiday lets currently on the business rates list in England, around 96% have a rateable value which would likely qualify them for Small Business Rates Relief and as a result pay no business rates at all.
A spokesman said: “The change announced will ensure that owners of properties that are not genuine businesses are not able to reduce their tax liability by declaring that a property is available for let but make little or no realistic effort to actually let it out.”
But according to the leader of Gwynedd Council, the fact that the UK Government feels the need to take action now should also prove the need for further measures in Wales.
“England are taking these measures now that will essentially bring them in line with those already in place in Wales,” said Cllr Dyfrig Siencyn.
“One would assume that their compulsion for doing so is that they see how much money is being lost to the public purse due to such a loophole being already in place.
“But as a council we have consistently argued that our legislation in Wales needs further amendment, which would provide many more millions of pounds to provide homes and meet the urgent housing needs of our communities.”
According to the Welsh Government there is “specific letting criteria which owners must meet for their property to be treated as self-catering accommodation.”
But in the Senedd last month, the Housing and Local Government Minister hinted at further potential action.
In response to a question from Delyth Jewell MS, Julie James said: “We are looking very carefully to see whether that number of days—70 and 140 at the moment—should be extended to be a much longer period; in other words, you have to use the house as a holiday house for a lot longer in order to be able to flip to commercial rates.
“And we’re also looking to see what can be done about the access to small business rate relief by people who do that, because that’s another issue.”
Adding there was a “real complexity about what we call second homes and who occupies them,” she concluded, “We are looking at a range of pieces of evidence to see where that would best be placed, and what arrangements people who do flip to business rates have to do in order to be a business in order to do that.”