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Closing tax loophole for rentals doesn’t go far enough for some

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.”

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    I have a nice holiday home that I used to rent for short lets from Easter to September and a six month let over the winter. However the SNP banned me and any tenant from agreeing to a six month specified tenancy, so now I let it out as short lets all year round and have discovered I can get peak week rates for October, Christmas and New Year lets, as well as frequent off peak shorter lets.

    It now also qualifies for Business rates (with nothing to pay) and is exempt from about £2k Council Tax as well. I also have plenty of opportunities to keep it well maintained without tenants getting in the way.

    As a result I am over £3000 a year better off (after tax) and there is one less high quality home now available for the winter months, which was previously let at a bargain rent from October to March every year. I'm winning - but I'm not sure there is any advantage to any tenants from the SNP's ludicrous 2017 legislation.

    The same situation is common in Edinburgh where flats let to students for 8 or 9 months per year were kept in pristine condition to attract summer visitors. Now students must pay higher rents 12 months of the year for flats which are kept safe but not as pristine as before when they paid lower rents for only 8 or 9 months of the year.

    Those claiming to "protect" tenants need to learn some real world common sense!

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    I am sure those that are forced to rent for 6 months are non too happy that they have to go elsewhere in the summer, its ironic that you dont seem to see this as a problem, devon & cornwall have a undersupply of homes & rents are high as they have to compete with air b&b


    I don't think the SNP dictatorship sttretches as far as the South West yet?

    If you had paid attention you would have read my winter tenants and Edinburgh students were actually getting great properties at bargain rental rates, subsidised by higher short term rentals.

    Anyway, my property, my rules.

    Six months cheap rent in a high quality house, which they would otherwise never be able to afford, was keenly sought by many tenants every time it was available and with total acceptance and understanding of the situation offered.

    No tenants win after the SNP interference. I didn't ever want the type of tenant anyway who wasn't prepared to accept my rules and I don't have to kowtow to them or their SNP heroes.

    As for those moaning about having to move on after six months from properties in the South West, the Scottish experience is most tenants would prefer six months to nothing, because that is the alternative, not twelve months or longer.

    South West tenants know tge reality of living in a tourist hotspot and can either work longer or harder to save up faster or move to areas like the North East where more affordable properties are available.

    We can't all stay exactly where we would really like to be. The prices in Monaco are just outrageous although I don't exactly fancy living near some of the neighbours anyway, no matter how big their boat and historic tax free dividend payments taken.

  • David Lester

    Cornwall Council, "mug" Tourists and tourism at every opportunity! so this is just another way they can get more money from it.


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