Holiday Home Owners Overpay Cornwall Council £10 Million a Year
Will a ‘Streisand Effect’ see the region lose much of this bonus?
If you are a regular reader of this blog then you’ll know that I often discuss the situation with Council Tax, Business Rates and Small Business Rate Relief. Just to summarise second home owners do not receive any council tax discount and must pay the full rate. Holiday lets that meet the criteria for number of weeks available and number of weeks let are classified as small businesses and so must move out of council tax and pay business rates which are generally a little higher than the council tax for the same property.
Along with the rates revaluation in 2005 the government introduced small business rates relief for smaller businesses which meant that owners of a single holiday let would pay half the business rates and in October 2010 this was increased to 100% in response to the recession meaning qualifying owners do not pay at all. This currently runs until March 2016 and we will find out in the autumn statement at the end of November if it is to be extended by a further year.
About this time last year there was an outbreak of articles in the press claiming that second home owners could be ‘flipping’ their properties to fraudulently avoid council tax. This provided some silly headlines but the real truth was quite the opposite- many owners of full time holiday lets are unaware of their entitlement to relief and so continue to pay full council tax.
The Streisand Effect
This is the term describing the phenomenon where an attempt to hide, remove or criticize something has the unintended consequence of publicising in more widely. It takes it’s name from Barbara Streisand issuing a $50 million lawsuit demanding that an aerial photograph of her Malibu mansion be removed from a website publicising coastal erosion. Prior to this action the photo had been downloaded 4 times however in the month following the lawsuit 420,000 people viewed the picture and many millions have since. There is nothing new in this of course- Oscar Wilde’s decision to sue the marquess of Queensbury for libel would certainly be an extreme example.
Potential Effect for Cornwall
Whenever a new owner talks to me one of the first things I ask is whether they are paying council tax and at least half of them are. There are about 15,000 holiday homes in Cornwall and if we assume an average council tax valuation of £1,500 a year that’s £22.5 million so if less than half are paying when they shouldn’t be the region is gaining £10 million a year. if everybody simply claimed what they were entitled to that’s a significant sum that would affect services somewhere.
Or Could There Be a Positive Effect?
There is another side to this in that all the publicity may prompt lock up second home owners to consider changing to full time holiday letting. When holiday homes are criticised there is often a failure to distinguish between these and full time holiday lets and there is a world of difference. A second home used only a few weeks a year deprives the location of income and has led in parts of the country to the collapse of local services such as village shops & pubs. A full time holiday let on the other hand brings increased income as well as employment for both local caretakers and administration staff. Perhaps the effect will be extra income and jobs for the region after all?
Is This All About to Change?
There’s a business rates revaluation underway to take effect from 2017 but the huge shift in policy is the announcement this month that local authorities will at some point in the future be retained by local authorities rather than distributed from the centre and there will be power to reduce rates at a local level. The initial proposals are quite cautious but this could turn into a revolution and I’ll cover this in a future blog.