Increasingly owners of second homes are reclassifying them as holiday lets to avoid Council Tax and to take advantage of the favourable small business rate relief. This is particularly prevalent in Devon and Cornwall where there are a large number of second homes.
Full Council Tax is payable in relation to residential properties that are used as a second home. In contrast, owners of rented holiday homes only have to pay business rates if the rental income of the business is sufficiently high. The rates payable differ according to the rateable value and the 100% exemption available to some is only in force until March 2015.
It is important to ensure that any application to reclassify a home as a holiday let is genuine as Local Authorities have remedies available to them if they suspect that the application has been made for tax avoidance reasons alone. They can demand to see proof that the property is genuinely available for letting. Properties must be available to let for at least 140 days a year in order to qualify. The reclassification process is independently verified by the Valuation Office.
This is a complex area and it is important to ensure that you obtain accurate advice.
Link: Gov.uk Business rates relief
If you would like advice, contact us.