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East of England Liberal Democrats

East Suffolk Party leads to way on second home tax loophole

April 11, 2018 9:00 PM
Originally published by East Suffolk Liberal Democrats

House with £ sign and personEast Suffolk Lib Dem Campaigners expose second home tax avoidance loophole

East Anglian Daily Times front page picks up the Lib Dems' campaign

Local Tory MP says she 'is aware of issue and awaits representation from constituents' having failed to answer Lib Dem's letter.

In East Suffolk where second home ownership is around a third of properties in coastal communities such as Southwold, Aldeburgh and Walberswick a homes loophole, which is said to be potentially costing councils millions in lost income, Lib Dems have called for a review and a change in the tax and registration arrangements for second homes.

While most second home owners pay council tax, research by the local Lib Dem campaigners show many second homes in coastal areas of Suffolk are now registered as holiday accommodation.

To qualify as a holiday let there is no requirement to be actually let out - only "available to let" for 140 days a year - which could mean as little as a card in the local newsagent's window. If the property's rateable value is less than £12,000, owners can get 100% rate relief - meaning they pay no tax on it.

In Southwold, Lib Dem campaigner David Beavan, found 354 small businesses were claiming relief last year, of which 263 were second home holiday lets. All the second home businesses were claimed to have qualified for rate relief, amounting to £551,744.

David added, the loose criteria required to register a holiday business and the ease of claiming rate relief could be costing the council around £500,000 a year.

"We are not against second home owners, many of whom elect to pay council tax, but we think it is unfair that people who can afford two homes are subsidised by people who can't afford one home. The rate relief is there to help struggling businesses, but the recent rate revaluation has put most small shops above the ceiling".

"We believe that there is a loophole open to exploitation and local councils are granting rate relief and losing significant sums in council tax".

East Suffolk vice chair Jon James said: "Many second home owners pay council tax, contribute to community life and hold the property as part of their future retirement portfolio and intend to live in the area. We also recognise that the local tourist economy requires a high level of accommodation especially catering for families. We believe however that the system is not fair to many small businesses, who are not getting the rate relief or to the community who miss out on the council tax. The Finance Act 1988 needs an urgent review with regard to short term letting. In the short term, second homes should meet furnished holiday let criteria to qualify for business rates".

Ten weeks ago the East Suffolk Party wrote to local Coastal MP, Therese Coffey setting out the issue and calling for the criteria to be brought in line with "furnished holiday lets", which would mean that it must be actually rented for 105 days each year'.

In a reply to the EADT* front page article by Andrew Hirst, Dr Coffey said she was aware of the issue, had raised it with ministers previously, most recently when with Southwold's deputy mayor. "I look forward to receiving the representation from constituents on this matter".

Well Dr Coffey the Lib Dems wrote to you and your constituents are still awaiting your reply!

* EADT Wednesday 11 April 2018 - 'Scandal' over second homes tax allowance ( front plus pps 4 & 5 and Leader)