Authorities losing out on millions due to holiday home loophole - Colliers

Local authorities are losing out on millions of pounds of council tax income due to the business rates system still providing many holiday and second home owners the opportunity to avoid paying the tax, according to business rates experts.

Colliers estimate the total loss to local authorities from business rates relief for holiday lets in England and Wales alone is currently around £110 million a year.

Property owners who make their properties available to rent as holiday lets for 140 days of the year can claim they are a small businesses, and as such can elect to pay business rates instead of council tax.

Those properties with a rateable value between £12,000 and £15,000 are also entitled to a relief on a sliding scale in line with the Government 's business rates relief policy.

With many holidaymakers choosing to 'staycation ' instead of jetting off overseas, residential property markets in UK holiday hotspots have risen sharply, particularly the South West - especially among second homeowners. House prices in Cornwall alone rose over 14 per cent in the last year.

According to Colliers there are over 73,000 holiday let properties now in the business rates lists in these countries that are eligible for 100 per cent business rates relief, and as such do not pay business rates or council tax.

John Webber (pictured), head of Business Rates at Colliers, said: “We want to make it clear we don 't blame the homeowners that take advantage of this tax break through making their properties available to let- this could be considered sensible tax planning.

“However we do blame the Government for over-seeing this mess which inevitably leads to friction in many coastal resorts. Most second home owners would gladly pay the minimum of council tax and neither need or expect this windfall at a time when public services are under enormous pressure “

“The fact that this trend of flipping from the council tax to the business rates list is growing every year is also a real cause of concern. A £110 million loss of council tax every year will soon mount up over the years. The government really needs to reform the system and consider the state of local authority finances when it announces its business rates reforms this Autumn. ”