Colliers: Councils lose out on £110m a year in council tax income
Councils lose out on £110m a year in council tax income due to holiday homes loophole, according to a Colliers analysis, because the Government’s business rates system is still allowing many owners of holiday homes and second homes to avoid paying the tax, provided they make their properties available to rent. This situation has become more frequent during the pandemic.
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 business. Therefore they can elect to pay business rates instead of council tax. However, as small businesses they can claim for relief on 100% 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.
The above is despite the boom in house prices as the pandemic and consequent trend to 'staycation' have caused residential property markets in UK holiday destinations to rise steadily. House prices in the South East rose over 9% in the last year.
According to Colliers, in England and Wales as a whole there are over 73,000 holiday let properties now in the business rates lists that are eligible for 100% business rates relief, and as such do not pay business rates or council tax.
John Webber, Head of Business Rates at Colliers said: "Given the pressure on local authority finances, we find it incongruous that this loophole has not been closed, and it is unfair that the local tax burden remains weighed onto local residents or other types of businesses that are struggling to pay their bills.
"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 £110m loss of council tax every year will soon mount up over the years."
About Colliers
Colliers is a diversified professional services and investment management company with operations in 68 countries and more than 15,000 staff. In 2019, corporate revenues were more than $3.0 billion ($3.5 billion including affiliates), with $33 billion of assets under management in its investment management segment.
