South Hams close tax loophole
South Hams Council
The co-owners must pay the residence tax
South Hams councilors say they are delighted with the government’s plans to close a controversial tax loophole that allowed second home owners to avoid paying business rates or council tax on their properties.
South Hams District Council has campaigned extensively to urge ministers to change the law.
On Friday (January 14), the government announced changes that would close that loophole but protect genuine holiday rentals and benefit popular holiday destinations, including those in the South Hams.
Currently, second home owners can avoid council tax and get small business rate relief by simply saying they will rent the property to holidaymakers.
But concerns have been raised that many never rent out their homes and leave them empty – unfairly benefiting from the tax relief.
The change will come into effect in April 2023 and will see second home owners pay council tax if they cannot prove they are genuinely renting out their properties on a commercial basis.
In 2020, council leader Judy Pearce (Conservative, Salcombe and Thurlestone) gave evidence on these issues to the Treasury select committee.
Responding to the announcement by Secretary of State for Leveling Michael Gove, Ms Pearce said: ‘This is great news following a sustained campaign by South Hams District Council, MP Anthony Mangnall and of myself to get this loophole in the business. closed tariff system. It is important for the cohesion of the community.
“Secondary landlords should pay into the local community unless they are actually running a rental business. Services such as motorways, fire and police, which may also be used or needed by holidaymakers, will benefit, as will the general revenue of district and county councils. We welcome all visitors, but beleaguered local residents should not have to subsidize services for them.
MP Anthony Mangnall added: “After two years of campaigning with Cllr Judy Pearce, Leader of South Hams District Council, it is good news that the government has taken this step.
“South Devon has one of the highest concentrations of second homes in the country.
“This announced change will help prevent people from using an unplanned loophole while ensuring they pay their fair share.
“The Chancellor and Michael Gove have both listened carefully to our needs and I hope this will be the first step in a long series to help improve accommodation issues in the South West and beyond.”
South Hams District Council declared a housing crisis last September, along with a 12-point action plan which included a campaign to close the tax loophole.
The council hopes this will make revenue collection in areas fairer while helping to provide longer-term rentals.
This would help alleviate the chronic shortage of affordable long-term rental housing, making it easier for local families to stay in the community.
Under the new rules, vacation rentals must be rented for at least 70 days a year to qualify for business rates. Vacation rental owners will need to provide evidence such as the website or brochure used to advertise the property, rental details and receipts. Properties will also need to be available for rental 140 days per year to qualify for this relief.
The council currently has just under 1,800 properties classed as businesses that are independent vacation rentals.
The measures were introduced, in part, to help local people gain access to property.
The average salary at South Hams in 2020 was around £30,000, but many homes in towns like Salcombe sell for over £750,000, 25 times the local average salary.
Small business rate relief has been introduced to support small businesses, party halls and convenience stores. But councilors said the rules had been put to use, allowing people to avoid paying for the local services they used.
In further action to tackle the housing crisis, South Hams District Council last July agreed that all new open market housing would only be supported if there is an agreement under Article 106 to guarantee their occupation as a principal residence.