In the past five years, the number of properties claiming 100pc business rates relief in the South West has doubled, according to Colliers’ analysis of official figures. This means the owners of 11,576 pay no property tax – equivalent to £48m in lost council tax. In Cornwall alone, the lost council tax bill is £24m.
Across England and Wales, there are 79,150 holiday let properties that qualify for 100pc business rates relief, meaning the owners pay no business rates or council tax. This is equivalent to an annual loss of £150m in missing council tax payments, a jump of 36pc compared to a year ago.
John Webber, of Colliers, warned that the Government’s plans to grant local authorities discretionary powers to charge double council tax on empty homes, outlined in the Queen’s Speech earlier this month, will backfire.
“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’,” Mr Webber said.
Agents selling properties in holiday home hotspots advertise the advantages of switching to the business rates system, said Mr Webber. “This has probably contributed to the further rise in house prices.” In the last four years, property prices in Cornwall have jumped by 49pc.
“We don’t blame the homeowners that take advantage of this tax break. We do blame the Government for overseeing this mess which inevitably leads to friction in many coastal resorts,” said Mr Webber.
A Government spokesman said: “This analysis in no way reflects real changes in councils’ income, as councils are compensated for loss of business rates through the local government finance system. “We’ve acted to close the previous loophole in business rates assessment, strengthening the rules so that from next April a property must be let for at least 70 days to qualify for business rates, as well as giving councils the discretion to charge double council tax on empty properties.
“This gives councils flexibility to strike the right balance between mitigating the adverse impact holiday homes can have on communities and supporting domestic tourism.”
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