Cornwall Holiday-Let Tax Refunds Put £10m Council Support at Risk
Cornwall Council says tax refunds linked to holiday-let status have cost it about £10m so far this financial year and could affect support for low-income…
Holiday-let tax rules are under pressure in Cornwall after the council said a refund practice had cost it about £10m so far this financial year. Calls change holiday lets treatment, as councillors and housing campaigners argue second homes should not escape council tax by switching to short-term rentals.
The dispute has a direct consequence for residents: Cornwall Council says the funding gap means it is reviewing how much council tax support it can offer up to 19,000 low-income households in future. The council wants national legislation changed, while people in the holiday-let industry say owners must meet genuine business criteria.
The issue centres on second-home owners who move properties into short-term holiday letting and then seek backdated council tax refunds. Under current rules, qualifying properties with a rateable value below £12,000 pay nothing through small business rate relief. Owners may also be eligible for refunds covering more than 30 years.
Independent councillor Adam Paynter, Cornwall Council’s portfolio holder for resources, described the arrangement as a loophole. “It's a huge loophole, which in this financial year has cost over £10m,” he said. Paynter said the council receives compensation for only three years of retrospective business rates.
Calls change holiday lets rules as council reviews support
The council said more owners had switched second properties to holiday lets since it introduced a council tax premium on second homes last year. It argues that national legislation needs to change to prevent the practice and address the financial consequences.
Housing campaigner Cornelius Olivier urged the council to treat holiday lets like second homes. He said both types of property reduced housing supply and contributed to the housing shortage. Olivier also criticised the prospect of reducing financial support for poorer households while tax privileges remained available to second-home owners.
Ben Maguire, Liberal Democrat MP for North Cornwall, said he would push for a change in the law and take the issue to ministers. He called the situation “absolutely crazy” and said he wanted an Airbnb Bill to prevent second-home owners from switching property status to avoid tax.
Jayne Kirkham, Labour MP for Truro and Falmouth, raised the issue with Alan Campbell, the leader of the Commons. Campbell said the government had published a call for evidence on the tax treatment of holiday lets and would publish its evidence in due course. He also offered to help arrange a meeting between Kirkham and the relevant minister.
The Ministry of Housing, Communities and Local Government said properties must meet strict criteria before they can be assessed for business rates. Holiday lets that do not qualify remain liable for council tax like other domestic properties. The ministry also said local authorities receive full pound-for-pound compensation from central government for losses resulting from small business rate relief claims.
Katie Warren of the Cornwall Self-Catering Collective rejected claims that owners were exploiting a loophole. She said operators must complete a process and meet genuine criteria to qualify for relief, and argued holiday lets support Cornwall’s visitor economy and provide jobs. The council’s reported cost so far this financial year is about £10m.
Source: bbc.co.uk
