31 holiday rentals on a single street in St Ives are exempt from business rates and council tax
In a single street in the bustling town of St Ives, it has been found that there are currently 31 holiday rentals which are exempt from local authority tax. It comes amid calls for the government to review how vacation rentals are assessed for non-domestic business rate purposes.
It was recently announced that the government would give local authorities like Cornwall Council the power to double council tax on second and empty homes. While this news was welcomed by many Cornwall residents, it has once again prompted calls for tax ‘loopholes’ to be closed for holiday rentals registered as businesses.
Currently, landlords who make their rentals available as short-term vacation rentals for 140 days a year can claim to be a small business and therefore pay business rates instead of council tax. They can then claim 100% tax relief if their property has a rateable value of £12,000 or less.
Read more: Second home owners face double council tax if they leave properties unused
Assessed value is the rental value of a property on the open market as of April 1, 2015, based on an estimate by the Valuation Office Agency. For vacation rentals, it is also based on its type, size, location, quality and the income the owner is likely to derive from their rental.
A Cornwall resident recently posted on social media how many single-street vacation rentals in his town are currently exempt from paying business rates. According to figures published on the government’s website, Back Road East in St Ives currently has 31 properties registered as holiday rentals, all of which have rateable values below the £12,000 threshold, meaning owners do not pay no professional tariff or residence tax.
This could be the case for thousands of vacation rentals across the county and sparked discussion in the comments to the post about how vacation rentals should be taxed so they can contribute to “the county infrastructure”. Others simply pointed out how the properties could be used as homes for locals.
Cath Navin, co-founder of First Not Second Homes, said: “That’s why we have to rethink this whole system – it doesn’t deliver anything…”
While Cornwall Labor councilor for Falmouth Penwerris, Jayne Kirkham, commented: “Why not say either that: a) residential properties still pay council tax; or b) if they register as businesses, set the threshold for vacation rentals in residential properties to zero, so they all pay business rates.”
Penzance Labor Advisor Cornelius Olivier also commented: “Second homes and holiday rentals should not be treated differently, they both contribute to the housing crisis (and the economic benefits of both are overstated). Vacation rentals that could be used as primary residences. must pay the housing tax (CT) and be liable for any additional levies on secondary residences.
“If they continue to be treated as commercial premises, then even if their exemption from business rates were removed, it would not be possible to charge them an additional CT and we see that second home owners are increasingly redefining their properties as ‘vacation rental premises’.”