Tuesday, 21 October 2014

Lib Dems campaign for end to second home tax loophole

Lib Dems in Cornwall are campaigning to end a loophole being used by some second home owners to avoid paying either council tax or business rates.

As the cabinet member in charge of finance in Cornwall, I have been asking ministers to close the loophole. Now Julia Goldsworthy, the Lib Dem parliamentary candidate for Camborne, Redruth and Hayle has written to the Chancellor.

Here's how the loophole works:
  1. A second home owner is normally liable for full council tax on their property (two years ago the government removed the requirement to give a discount on second homes and the council immediately moved to require full payment to be made). The average council tax in Cornwall is just over £1400.
  2. But if they declare that the property is actually a holiday let and available to rent for 140 days or more per year then they can classify it as a business and be liable for business rates. The average business rates for any business with the word holiday in the category is about £1030, but this includes vast holiday parks so in practice the average for holiday lets is far less. 
  3. But most holiday lets are able to claim small business rate relief which reduces their payment to zero.
The decision as to whether a property is actually a business or residential is taken by the Valuations Office Agency - an independent body over which the council has no control. I have asked the government to ensure that they are applying the current rules correctly and to make sure that the VOA obtains evidence that the property is actually a genuine holiday let before they re-classify it.

This dodge is currently legal, but it means that Cornwall Council is missing out on potentially millions of pounds of income which could help to support services which are facing the axe. That is why we want the government to take action to end the dodge. But in the meantime we want an assurance that only genuine holiday lets are being moved from council tax to business rates.

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