Second home 'loophole' fears as Yorkshire holiday lets get £30m in virus grants

Second home owners in Yorkshire who used a loophole allowing them to avoid taxes by declaring their property as holiday accommodation without ever needing to let it out are now eligible for millions in Government coronavirus grants designed to support struggling small businesses, it has been warned.

By Chris Burn
Monday, 4th May 2020, 10:20 am
Updated Monday, 4th May 2020, 12:12 pm
Runswick Bay is among the locations in Yorkshire popular with second home owners. Copyright: jpimedia
Runswick Bay is among the locations in Yorkshire popular with second home owners. Copyright: jpimedia

Concerns about the issue have been raised after more than £30m was provided to holiday properties in the county through the scheme, which provides one-off grants of £10,000 to companies that receive small business rates relief.

Figures collected by our sister title The Yorkshire Post have shown more than £15m worth of support has been provided to holiday homes in the Scarborough Council area, along with almost £5m in York, £3.8m in Richmondshire and over £2.4m in Harrogate, with hundreds of thousands handed out in other areas.

But there are fears that as well as supporting legitimate tourism businesses, some of the money is going to second home owners whose properties are masquerading as holiday lets as a way of avoiding council tax and qualifying for small business rates relief.

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There are concerns a small business grant scheme launched by Rishi Sunak in response to coronavirus may be open to abuse. Picture: Getty Copyright: Getty

According to real estate adviser Altus Group, there are 6,470 holiday properties in Yorkshire and Humberside which have been flipped from residential to commercial use that are now eligible for the one-off £10,000 grant.

Altus said nationally there are 55,000 properties in this position, eligible for over £550m in state funding, including £64.7m in the Yorkshire region. It said there is no available data on how many are genuinely being let.

Robert Hayton, head of UK business rates at Altus Group, said: “It cannot be right that second home owners, who make them available to rent for as little as 20 weeks a year, are set for cash grants, while many businesses who share space or those with business rates inclusive rents, are set to miss out.”

Craven District Council, which has given “several million” to holiday home firms through the grant scheme which is being distributed via local authorities, said it has repeatedly raised concerns with the Government about the classification of second homes as small businesses.

Yvonne Peacock, North Yorkshire county councillor for the Upper Dales, said she was “very concerned” about potential exploitation of the grant scheme by second home owners who do not need the cash. “I’m hoping their consciences mean they will not apply for it,” she said.

Second home owners are able to receive the cash if they have registered their property as self-catering accommodation and made it available for rent for at least 140 days per year so it is valued for business rates - but with no requirement for any letting to actually take place.

A consultation to close what the Government itself described as a ‘loophole’ costing local authorities millions was launched by now Chancellor Rishi Sunak in late 2018 when he was Local Government Minister but no changes in legislation have yet been made.

The consultation proposed moving to the same rules as Wales where a property must be actually let for at least 70 days a year to qualify.

Many legitimate holiday homes are in desperate need of the financial support that has been offered, an industry association boss has said.

But Martin Sach, chief executive of the Holiday Home Association, accepted some questionable claims are likely to have been made.

“I do accept there may be some people around who have made claims for things they weren’t entitled to. Unfortunately that is life.”

“The first thing I would say is that we would offer no support whatsoever to anyone who told lies about the true use of the property. It is very straightforward indeed,” he said.

“We do not support or represent people who have second homes that are primarily for their own use. If someone has a flat in Mayfair and a bolthole in the Yorkshire Dales, we are not representing those people.

“Those are second homes – we represent commercial businesses that let holiday homes as their primary business.

“These are small businesses that in most cases are owned by individuals who depend on them for their livelihoods.

“They are small businesses whose business has disappeared overnight. They have lost a vast amount.

“The industry is in dire trouble and they will need every bit of support on offer. Nobody knows when this is going to end.”

Mr Sach, whose association represents around 10,000 businesses in England, said he did not think “it is that common” for second homes to pretend to be running holiday lets in order to avoid council tax.

He said special tax rules around what officially qualifies as a Furnished Holiday Letting, including a requirement for the property to be let to the public for at least 105 days per year, provide a clear indication of what is a legitimate business.

However, that is not the criteria being used to assess eligibility for the Government’s coronavirus grant fund for small businesses, under which homes registered as self-catering accommodation can qualify with no requirement for any letting of the property to have taken place.

Mr Sach added: “Tourism is a vital industry in many rural areas of England and the Yorkshire Dales and the Yorkshire coast is no exception.

“Tourism can’t take place without accommodation and holiday cottages are one of the most popular ways of people enjoying the English countryside and the Yorkshire coast as well.

“Without that accommodation there would be no tourism industry and a lot of people’s livelihoods would be lost.”

The owner of seven holiday properties in North Yorkshire has said the Government grants alone will not ensure the survival of her business.

Melanie Carroll, who runs holiday homes in the Filey and Thirsk area, said while the Government’s £10,000 grants were “very welcome”, she is seeking loans to cover her costs.

“We have an eight-bedroom property that sleeps 14 in Filey. It rents out at £2,000 a week during peak season,” she said. “The Government help of £10,000 represents five holidays – it goes nowhere near what we are likely to lose over many months of holidays.”

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