The news comes as second homeowners who pretend to let their properties out to holidaymakers try to save on taxes, meaning they will now be forced to pay more under the proposals. The Department for Levelling Up, Housing and Communities (DLUHC) is moving to close a loophole in the system which allows people to access tax breaks if they dishonestly claim their properties are being used as holiday lets.
As it stands, people who own second homes in England can avoid paying council tax and access small business rates relief by simply declaring an intention to let the property out to holidaymakers, the DLUHC said.
They do not need to show evidence that their homes are actually being used for this purpose, leaving the door open for people to abuse the system.
This will change under the plans announced on Friday – with second homeowners forced to pay council tax if they cannot show they are genuinely renting out their properties on a commercial basis.
From April 2023, in order to access the cheaper tax rates, they will have to prove their homes were let for a minimum of 70 days the previous year.
People will also need to show their properties were available to rent for 140 days that year, and will be again in the year to come.
Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.
The new measures are designed to crack down on those who “take advantage of the system to avoid paying their fair share”, the DLUHC said.
Michael Gove, the Secretary of State for Levelling Up, said: “The Government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.”
Mr Gove added: “However, we will not stand by and allow people in privileged positions to abuse the system by unfairly claiming tax relief and leaving local people counting the cost.”
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Crispin Truman, chief executive of CPRE, the countryside charity, said: “While we support plans to stop people abusing a holiday home tax loophole, these proposals don’t go far enough.
“There is a rapidly growing housing crisis across rural England and the Government needs to get a grip of it, fast. Ministers must do much more to meet the affordable housing needs of rural communities.”
In 2018-19, 2.4 million households in England reported having at least one additional residential property.
In most cases, these properties are let out to others (e.g. in the private rented sector) but 772,000 of these household’s report having second homes.
These are homes that are primarily used as holiday homes (by family, friends or let to others as a holiday let) or are occupied while working away from home.
Second homes can be owned or rented.
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The location of second homes has changed over the last decade.
In 2018-19, 57 percent of second homes were located in the UK, 34 percent in Europe; 9 percent in non-European countries.
Since 2008-09 there has been an increase in the proportion of second homes in the UK and a corresponding decrease in European and non-European second homes.
A survey by the Ministry of Housing, Communities and Local Government found that 39 percent of people owned second properties as holiday homes, 35 percent as an investment, and 9 percent were bought as future retirement homes in more desirable locations.