Holiday home loophole to create £150m loss this year - Colliers

Colliers has estimated that the total loss to government from business rates relief for holiday lets in England and Wales alone is now around £150million a year (2022/2023).

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

However, as small businesses they can claim for relief on 100 per cent of the business rates payable if their properties have a rateable value of less than £12,000.

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.

Colliers has analysed the rating lists for the Southwest of England where 11,576 new properties, claiming 100 per cent business rates relief have entered the list in the last five years- more than double the number claiming at the start of the 2017 Rating List.

This region now has 22,841 holiday let properties in the rating list that are eligible for 100 per cent business rates relief and so don 't pay the tax. Colliers estimates that if these properties at least paid council tax, the local councils would benefit by £48million of income.

According to Colliers there are now over 79,150 holiday let properties in the business rates lists in England and Wales that are eligible for 100 per cent business rates relief, and as such do not pay business rates or council tax. Colliers estimates this is reducing income to local authorities of around £150m a year.

John Webber (pictured), head of business rates at Colliers is concerned that the latest announcements in the Queen 's Speech could make matters worse. The government has proposed that under new rules, English local authorities will gain 'discretionary powers ' to levy a premium of up to 100 per cent on council tax bills for second homes that are furnished but not occupied as a sole or main residence.

Mr Webber said: “Although this measure is supposed to create extra funding that could be used to help local services and ensure council tax is kept low for local residents, in reality it will mean more second homeowners in England will have an incentive to flip these second homes into 'businesses ' to avoid paying a double council tax. It certainly won 't deter the practice. ”