Clampdown on tax loophole for thousands of second homes registered as holiday lets

·2-min read

Second home owners face a clampdown over a tax loophole that can save them money by claiming the properties are available for holiday lets.

Currently 60,000 properties classed as holiday lets are liable for business tax rather than council tax, which in the vast majority of cases currently means paying nothing at all.

The Treasury said it would "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".

It was announced as part of a raft of consultation documents on tax published by the Treasury which also included plans to shake up air passenger duty (APD).

The holiday lets move relates to properties in England which the owner declares are intended to be made available to let 140 days in the coming year, making them liable for business rates rather than council tax.

In 96% of cases, they have such a low rateable value that they qualify for small business rates relief which means they pay nothing at all.

There is currently no requirement for checks to verify that the properties are actually commercially rented out.

Following a consultation launched in 2018, the government said it would now legislate to tighten the rules.

Another proposal outlined by the government was a change to air passenger duty - a tax on flights - by increasing the number of international distance bands.

There are currently two bands - one for short-haul and one for long-haul.

Increasing the number of categories would reinforce the "polluter pays principle", the government said, by "ensuring that those who travel furthest internationally, and consequently have the greatest impact on the environment, incur the most APD".

The change could happen alongside previously-revealed plans to cut APD on domestic flights in a bid to improve connectivity within the UK.

Also included in the series of consultations were proposals to cut down on inheritance tax red tape, reducing the paperwork families need to fill out.

The government also published an interim report on its review of the business rates system - long the subject of calls for change from the retail sector - detailing responses from some firms.

But a final report will not be published until the autumn.