Property investors exploiting a second home business rates loophole may cost councils millions in lost revenue, says the government.
To find out if second home owners are avoiding council tax, the Department of Housing, Communities and Local Government has launched a consultation aimed at plugging the gap.
The law demands second home owners pay council tax on their properties unless they rent them out as holiday homes.
If they make their properties available to let to holidaymakers for at least 140 days each year, they qualify for business rates.
If they do, the home attracts small business rate relief, which means no rates are paid on properties with a rateable value of £12,000 or less.
The government says 47,000 English second homes are liable for business rates, with 96% paying nothing because they have a low rateable value.
Councils argue that no one checks if the homes are available to let, and in many cases, the owners carry on enjoying the properties while using council services like rubbish collection for which they pay nothing.
The consultation claims holiday owners avoid council tax by making no realistic effort to rent out their properties, restrict availability or ask for unrealistic rents.
Local Government Minister Rishi Sunak said: “We’re aware of concerns that the current arrangements for valuing second homes for business rates and claiming relief, do not provide strong enough protections against abuse.
“We are seeking views on whether we should strengthen the checks already in place to ensure second-home owners have to pay council tax, while ensuring genuine holiday let businesses are able to demonstrate they are eligible for business rates relief.”
The consultation is asking if holiday lets should pay business rates rather than council tax or if the rules should be overhauled.
The consultation ends on January 15, 2019.
