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UK To Shutter Second Home Tax Avoidance 'Loophole'

Friday, November 9, 2018

The UK Government has announced its intention to tackle the use of a commercial property tax (business rates) exemption, intended only for small businesses, by second-home owners to avoid paying residential property tax (Council Tax) on those homes.

Currently, second-home owners pay Council Tax on their properties including when the property is available to rent infrequently during the year. However, properties are valued for business rates when owners declare their property is available to let as holiday accommodation for 140 days or more each year.

Properties registered for business rates, rather than Council Tax, typically qualify for small business rate relief, the Government explained. This provides 100 percent relief from business rates, so no tax is due on properties with a rateable value of GBP12,000 (USD15,700) or less.

Around 47,000 holiday lets in England are liable for business rates, of which about 96 percent have rateable values of GBP12,000 or less. Currently there is no requirement for evidence to be produced that a property has actually been commercially let.

Announcing a consultation on closing the "loophole," the Government said: "Genuine businesses can claim the relief to which they are entitled. However, the Government is aware of concerns that owners of second homes which do not fall into this category could exploit the system by not paying Council Tax, whilst still using local services."