Calls to change holiday lets council tax rules

A law allowing second homeowners to switch their properties to short-term holiday lets and then claim backdated council tax refunds should be changed, a council has said.

Cornwall Council said the practice had cost it about £10m so far this financial year - meaning it could have to find savings on its council tax support scheme for low income households.

Housing campaigners have branded it "outrageous" and joined calls for holiday lets to be classed as second homes so they still pay council tax.

However, those in the industry said holiday let owners had to prove they were legitimate businesses and were a vital part of the local visitor economy.

The council said there had been an increase in people switching their second property to become a holiday let since it introduced a second homes council tax premium last year.

Owners whose properties qualify as a short-term let and have a rateable value below £12,000 pay nothing under small business rate relief.

They could also then be eligible to have their council tax refunded retrospectively over a period of more than 30 years.

Independent councillor Adam Paynter, portfolio holder for resources, said: "It's a huge loophole, which in this financial year has cost over £10m.

"The council loses out because we only get compensated for three years of retrospective business rates."

He said it was national government legislation that needed change to stop it from happening.

The council said the funding gap meant it was now having to review the amount of council tax support it could offer to up to 19,000 low-income households in future.

Housing campaigner, Cornelius Olivier, said he was outraged at the situation.

"Cornwall Council are talking about cutting financial support for the poorest people in Cornwall yet we've got to fork out tens of millions for a bunch of selfish greedy second-home owners," he said.

"Treat holiday lets the same as second homes.

"They're both eroding housing supply and contributing to housing shortage, and it's an incredible waste of money to be giving tax privileges to their owners."

Ben Maguire, Liberal Democrat MP for North Cornwall, said it was "absolutely crazy" and he would push for a change in the law.

"It's a really serious situation and I'll be taking it to ministers," he said.

"We're talking about millions and millions of pounds in lost revenue to Cornwall Council, which at the moment is really struggling financially.

"That's why we need my Airbnb Bill so that second homeowners can't flip their properties, they can't avoid paying tax."

Jayne Kirkham, Labour MP for Truro and Falmouth raised the question to Alan Campbell, the leader of the Commons, in the House of Commons.

Campbell said it was a "concern held by members across the House, and which was why the government had "published a call for evidence seeking views on the tax treatment of holiday lets, which will publish its evidence in due course".

He said he would help assist Kirkham setting up a meeting with the the relevant minister to discuss this topic further.

Ministry of Housing, Communities and Local Government said: "Properties need to meet strict criteria before they can be assessed for business rates and where a holiday let does not meet these criteria, it is liable for council tax in the same way as any other domestic property.

"Local authorities receive full pound for pound compensation from central government for any loss of income due to claims for Small Business Rate Relief."

However, Katie Warren, from industry body the Cornwall Self-Catering Collective, rejected suggestions businesses were exploiting a "loophole" and said they were vital to the tourism economy.

"They have to fill out genuine criteria in order to be a holiday let that receives small business rate relief - so they have to go through that process in order to qualify.

"They contribute greatly to the Cornwall visitor economy and provide jobs so therefore they should be treated as businesses.

"If you lose the bed stock by minimising holiday lets in Cornwall, how is that going to affect all the other tourist business that are here?

"One in five jobs in Cornwall are supported by tourism, and I'm afraid holiday lets are a huge part of that."

Follow BBC Cornwall on X, Facebook and Instagram. Send your story ideas to spotlight@bbc.co.uk.