Local and central government will lose out on millions of pounds of council tax income this year because the Government’s business rates system is still giving many holiday home and second homeowners the opportunity to avoid paying the tax, provided they make their properties available to rent.

Colliers estimates the total loss to government from business rates relief for holiday lets in England and Wales alone is now around £150m a year (2022/2023) - a significant sum that could certainly help bridge the gap in local government finances.

Property owners who make their properties available to rent as holiday lets for 140 days of the year can claim they are a small business and as such can elect to pay business rates instead of council tax. However as small businesses they can claim for relief on 100% of the business rates payable if their properties have a rateable value of less than £12,000. Those properties with a rateable value between £12,000 and £15,000 are also entitled to a relief on a sliding scale in line with the Government’s business rates relief policy.

The Government has taken some steps towards closing the loophole and from April 2023 a property can only qualify for business rates if it is made available for 140 days a year and let out for short periods totalling at least 70 days. But even under these rules, a second homeowner that rents out their property for 10 weeks of the year would still be able to pay no tax.

In the meantime, Colliers has analysed the rating lists for the Southwest of England (Cornwall, Devon, Somerset and Dorset) where 11,576 new properties, claiming 100% business rates relief, have entered the list in the last five years. This is more than double the number claiming at the start of the 2017 rating list.