The closing of a tax loophole which allow some owners of holiday lets to avoid paying council tax does not go far enough for one local authority at the centre of Britain’s tourist trade.
Last week the government said it would change the favourable tax status of many holiday lets. Currently HMRC classes a ‘furnished holiday let’ as a business, with consequently lower taxes than those on a buy to let property.
Owners must meet certain criteria, chiefly that the home is available to let for 201 days a year and is actually let for at least 105 days, with no single letting exceeding 31 days; and, of course, the property must be fully furnished.
These rules are highly specific but mean the owners pay business rates instead of the usually-higher council tax; owners can also offset many operating costs against tax, and when it comes to selling the Capital Gains Tax liability is lower than on a buy to let investment.
However, Cornwall Council is qualified in its support for the move. Commenting to the Western Morning News, council members say Cornwall loses £10m a year from holiday homes not paying any council tax or business rates. In the county, around half of the total of all holiday lets and second homes combined do actually pay council tax but some councillors want to levy additional council tax on these owners anyway - figures suggested range from 25 to 50 per cent as a surcharge.
In addition, some councillors want no business tax entitlement even for those holiday lets which are genuinely available for the required number of days. One such councillor comments to the WMN: "The proposed changes do not stop holiday owners with genuine businesses from paying no council tax. Most can register for business rates and therefore pay nothing because they are classed as small businesses” says one councillor, who claims it is infuriating to Cornish residents who pay often over £2,000 a year towards services while owners of similar properties pay nothing."
And Andrew George, a former Liberal Democrat MP in the county, says: "If the Conservatives were genuinely intending to introduce legislation to close this tax loophole it would of course be welcome. But they’ve provided little information on what legislation is planned and just offered another consultation after a previous consultation a few years ago. That this has been announced just before crucial local elections suggests their purpose is cynical rather than substantial.”