Holiday home owners exploiting a business rates loophole may be avoiding the payment of millions of pounds of council tax, says a minister.
Property investors can claim business rates if they let a home to tourists for at least 140 days a year. And because their rateable value likely falls below £12,000, they pay no rates under an exemption for small businesses.
Councils in England argue that second home owners are exploiting the loophole to use local services for free when they are not renting out their properties and should pay council tax like other home owners.
The government says no statistics are kept tracking whether the claim is true, but estimates that although around 47,000 second homes in England are listed to pay business rates instead of council tax, 45,000 pay nothing because their rateable value is less than £12,000.
To find out if second home owners are abusing the business rates scheme, the Department of Housing, Communities and Local Government has launched a consultation.
Local Government Minister Rishi Sunak said: “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.”
The consultation explains the rental availability of second homes is not checked.
Councils claim property owners often make no realistic effort to rent out their second homes, restrict availability or put off tourists by asking unrealistic rents.
The consultation, which ends on 15 January, 2019, asks if holiday home owners should pay council tax instead of business rates and if the rules should be overhauled.