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second home

Government shuts the door on second home tax loophole

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Genuine small holiday letting businesses in England to be protected by closure of second home tax loophole

second homeOwners of second homes in England who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under tough new measures.

The new rules, to be introduced in April 2023, were announced today in a statement from the Department of Levelling Up, Housing and Communities and Michael Gove MP.

In summary:

  • Homeowners who leave properties empty while pretending to let them to holidaymakers will be targeted
  • Under the new rules, holiday lets must be rented out for a minimum of 70 days a year to qualify for business rates, which often brings financial advantages
  • Changes to tax rules will protect genuine holiday lets and benefit popular holiday destinations, including Devon, Cornwall and the Lake District

Owners of second homes who abuse a tax loophole by claiming their often-empty properties are holiday lets will be forced to pay under tough new measures announced by the government today (14 January 2022).

The changes will target people who take advantage of the system to avoid paying their fair share towards local services in popular destinations such as Cornwall, Devon, the Lake District, Suffolk, West Sussex and the Isles of Scilly.

How did the second homes tax loophole work?

Currently, owners of 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. However, concerns have been raised that many never actually let their homes and leave them empty and are therefore unfairly benefiting from the tax break.

Following consultation, the government will now bring changes to the tax system, which will mean second homeowners must pay council tax if they are not genuine holiday lets.

What’s changing for owners of second homes who are registered for business rates?

From April 2023, second homeowners will have to prove holiday lets are being rented out for a minimum of 70 days a year to access small business rates relief, where they meet the criteria.

Holiday let owners will have to provide evidence such as the website or brochure used to advertise the property, letting details and receipts.

Properties will also have to be available to be rented out for 140 days a year to qualify for this relief.

Government backs small business including responsible short term lets

Secretary of State for Levelling Up Rt Hon Michael Gove says:

“The government backs small businesses, including responsible short-term letting, which attracts tourists and brings significant investment to local communities.

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.

The action we are taking will create a fairer system, ensuring that second homeowners are contributing their share to the local services they benefit from.”

Tourism industry welcomes clear distinction between second homes and genuine self-catering businesses

Kurt Jansen, Director of the Tourism Alliance says:

“Establishing these new operational thresholds for self-catering businesses is welcomed by the tourism industry as it makes a very important distinction between commercial self-catering businesses that provide revenue and employment for local communities, and holiday homes which lie vacant for most of the year.

It is recognition that tourism is the lifeblood of many small towns and villages, maintaining the viability of local shops, pubs and attractions.

The move will protect genuine small holiday letting businesses across the country and will support local economies by encouraging tourism and by ensuring second homeowners pay a fair contribution towards public services.

Around 65,000 holiday lets in England are liable for business rates of which around 97% have rateable values of up to £12,000. Currently there is no requirement for evidence to be produced that a property has actually been commercially let out.”

This article is only meant as a top line summary of these issues. Need more guidance on whether you should be paying business rates or council tax? We recommend that you seek a professional working in this area. You can also contact the Valuations Agency Office. 

Boshers offer specialist holiday home insurance to holiday let and cottage complex owners across the UK. If you need an insurance quote for your holiday let call us on 01237 429444.

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Council Tax Bill second home

Labour plans to double council tax on second homes

Council Tax Bill second home Plans to double council tax on holiday homes

October brings with it the political party conference season. A time when each party comes together in order to flesh out their major policies. Holiday homeowners reading some of the headlines which emerged from the Party Conferences recently, the reading may seem quite bleak.

The reason?  When shadow housing secretary John Healey took to the stage he announced that he was ready to place a brake on the growing difference between Britain’s housing ‘haves’ and ‘have-nots’ in order to tackle homelessness that “shames us all”.

The focus of much of his ire was the country’s second home owners. Those owning a holiday cottage or second residence potentially being targeted for an additional £560 million tax bill – a doubling of their council tax.

Whilst potentially alarming for cottage owners, a question to be asked here is whether or not you are currently paying council tax on your holiday home or instead pay business rates, and the pros and cons of each of these options.

Should you be paying business rates or council tax?

The answer on this question comes down to two elements; what you use your second home for and how many days you let it out for.

  1. When your second home is used purely for you and your family you should be paying council tax.
  2. If you have a second home and it’s available for short term lets by paying guests for more than 140 days of the year then it should be assessed for business rates and added to the business rates list.

There are currently only 47,307 holiday homes liable for business rates in England. This would suggest that many holiday homes are potentially paying council tax when they should instead be paying business rates. So is there any benefit to doing so if you’re currently paying council tax on a property you let out to guests for a large proportion of the year?

The potential advantages of business rates

Small Business Rate Relief provides 100% relief from business rates on properties with a rateable value of £12,000 or less. This is provided the business uses only one property. It is however worth bearing in mind that relief of this type may still be available under certain circumstances. Therefore it’s worth consulting with your local ratings department if you are unsure.

There is also a concern that some second home owners are registering for business rates to avoid paying council tax. Currently there is little in the way of monitoring to ensure that holiday homes qualify for small business rate relief. For this reason the The Secretary of State for Housing, Communities and Local Government has launched a consultation:

This article is only meant as a top line summary of these issues. Need more guidance on whether you should be paying business rates or council tax? We recommend that you seek a professional working in this area. You can also contact the Valuations Agency Office. 

Boshers are specialist providers of holiday home insurance. For information on how we can help protect your holiday let business ,call us on 01237 429444.

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holiday home waste

Disposing of holiday home waste – your obligations

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holiday home waste

When we’re at home putting the bins and recycling out can sometimes be a chore. However it is certainly made easier than dealing with your holiday home waste by being there most of the time. Holiday homeowners often live a long distance from their holiday letting property, or perhaps only have the capacity to visit infrequently. So with this in mind how do you keep on top of your holiday home waste collection; and what are your obligations?

What are your obligations with respect to dealing with your holiday home waste?

By law, all businesses are required to take ‘all reasonable steps to ensure their waste is kept safe’; and when removed is ‘handled by a contractor authorised to collect, transfer, recycle or dispose of it safely.’

Unfortunately, waste disposal isn’t included within business rates. This is because it’s deemed fairer to charge businesses individually based on the quantity and type of waste they produce.

Is a holiday home a business?

The question is therefore, as a holiday cottage owner, are you a business?

The Controlled Waste (England and Wales) Regulations 2012 indicates that holiday lets and self-catering accommodation providers do qualify as a business. Therefore for the purpose of holiday home waste collection, holiday let owners should pay for a commercial waste service.

Full collection and disposal charges are applicable unless you receive the small business rates relief. It’s worth noting that many individual holiday lets do qualify; in which case you would only need to pay for the collection of the waste from your holiday cottage.

The benefits of commercial waste collection

There are a few benefits to having your holiday home waste collected commercially; such as

  • compliance with the waste regulations
  • increasing the frequency of collection during peak periods
  • matching collections to fit in on or before your changeover days

Saving money and increasing participation in recycling

When paying for your waste to be collected it goes without saying that in order to reduce costs, it’s important for you to reduce the amount of waste generated by your property.

But how do you actually do that in practice?  The answer is recycling although you’ll need to be savvy in getting your guests engaged when on holiday.

Although most of us will now recycle at home, attitudes can sometimes slip when we’re wanting to relax. Therefore making it as easy and simple as possible for your guests is vital to increasing their participation.

Clearly labeled or perhaps coloured containers are a must to make sure they know exactly what goes where. Also consider where you position them and if you welcome families into your cottage, whether it can be turned into a game to get everyone involved.

How do I organise a holiday home waste collection?

For more information on refuse collection please contact your local council for details of commercial waste contractors. Expect to pay a fee for a supply of commercial waste sacks and agree your collection days. It’s a good idea to make it clear to your guests when your holiday home waste and recycling will be collected and ask them politely if they will put the bags out in good time on the allocated day.

If you’d like to discuss how our specialist holiday home insurance can ensure your property has the cover it needs, please give our experienced team a call on 01237 429444.

 

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Holiday Cottage

Business Rates for Holiday Cottages

Holiday CottageRateable Values: Your Holiday Cottage

If we said 140 days to you would this seem a long period of time?

That’s a little over four and a half months or in terms of the tourism season, approximately the length of time between this year’s Easter Sunday and the return to the classroom of many children across the country in early September.

The vast majority of holiday cottage owners in England will have their properties available during this period and beyond. As a result the Valuation Office Agency (VOA) will assess them for a rateable value. A process which is used In order to establish the level of business rates for holiday cottages.

What is a Rateable Value?

The rateable value of a property is a professional assessment of the annual rent your holiday cottage could obtain. It’s a key factor used by your Local Authority to calculate the level of business rates you should be paying.

If your holiday cottage is let for more than 140 days in a financial year then it will be assessed for a rateable value.

What is taken into consideration when calculating the ratable value of your holiday cottage?

When assessing property such as offices, shops or other industrial premises there is a wide range of rental evidence from which Local Authorities can compare, contrast and establish rateable values.

The VOA explain that because very few locations have this level of rental evidence for holiday cottages they often need to use other methods in order to establish a ratable value, such as the gross receipts your cottage takes during the valuation period. This allows them to build a picture of the potential income your cottage could make and in doing so, establish what someone would otherwise pay in rent for the property.

They may also take into consideration the type, size, location and the quality of accommodation your property provides when making calculations.

How is this information gathered?

If you have a holiday cottage that should be rated then you’ll need to complete a ‘Request for Information’ form.

The V06048 form has been designed specifically for holiday cottages and self-catering units, with the questions designed to take into consideration differences in tariffs, marketing, levels of service and other factors such as quality of furnishings.

The overall aim of the form is to establish the income you gain from the property and the level of expenditure required to achieve that income.

What do you do if you believe that your rating is wrong?

If you believe the ratable value of your holiday cottage is incorrect you should contact your local Valuation Office. If you’re still unsatisfied with your rating you’re able to launch an appeal, which is known as making a ‘proposal’ to alter the rating list.

You can make a single appeal to the rateable value of your holiday cottage during the ‘life’ of the rating list, which usually lasts for five years (the current list runs from April 2010 to 31 March 2017).

To appeal against your listing you can visit www.voa.gov.uk or by obtaining a form from your local Valuation Office. Other points to note are that non-domestic rates or business rates are an allowable expense and therefore tax deductible for income or corporation tax purposes. Any owners accommodation should remain subject to council tax.

Boshers are specialist providers of insurance for holiday homes and cottages. For more information on how a specialist insurer can help and support your holiday home please give us a call on 01237 429444.

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