Loophole gives £85m to owners of second homes

Second home owners who have registered their properties as businesses are set to land an £85million windfall from the Government’s small business grant scheme. 

Experts said the loophole allows the owners of second homes – many of which are registered in Devon, Cornwall, the Lake District and in seaside towns such as Scarborough – to register them as businesses as long as they ‘make them available’ to let for 140 days of the year and take bookings for at least half of those days. 

The practice, known as ‘flipping’, allows the property owners to pay business rates instead of council tax. It also means they are eligible for the Government’s small business rates relief scheme, which means all but the largest properties pay little or no tax. 

Windfall: Many second homes are registered in Devon, Cornwall, the Lake District (pictured) and in seaside towns

Windfall: Many second homes are registered in Devon, Cornwall, the Lake District (pictured) and in seaside towns

Windfall: Many second homes are registered in Devon, Cornwall, the Lake District (pictured) and in seaside towns

The owners are now also poised to collect a share – around £1,300 each – of £2.2billion support for small businesses closed due to coronavirus restrictions. 

According to commercial property adviser Altus Group, there are more than 62,000 properties in England which are classified as holiday homes and have been flipped to become ‘commercial’ premises for tax purposes. 

It is not the first time that the owners of second homes have benefited from Government handouts during the coronavirus crisis. 

In March, to help negate the economic impact of the pandemic during the first set of national restrictions, the Government provided funds to councils to support small businesses that pay little or no business rates by providing a one-off cash grant of £10,000. 

It has been calculated that the owners of more than 55,200 holiday homes were entitled to £552million as a result. 

Two years ago, the Government launched a consultation – which has so far not concluded – on the loophole. At the time, it complained that second home owners ‘could exploit’ what it described as a ‘business rates ‘loophole’ which could be costing English councils millions in lost council tax’. 

It admitted there was ‘currently no requirement for evidence to be produced that a property has actually been commercially let’ for the required 70 days a year. 

Robert Hayton, head of property tax at Altus Group, said: ‘In most cases this grant for second home owners will be far more lucrative than ‘business as usual’, outstripping the lost profit and even the gross rents. Compare that with the catastrophic losses being sustained by pubs, restaurants and nonessential retail.’

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