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

Runswick Bay is among the locations in Yorkshire popular with second home owners. Picture: Marisa CashillRunswick Bay is among the locations in Yorkshire popular with second home owners. Picture: Marisa Cashill
Runswick Bay is among the locations in Yorkshire popular with second home owners. Picture: Marisa Cashill | jpimedia
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.

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 The Yorkshire Post have shown more than £15m worth of support has been provided to holiday homes in the Scarborough Council area covering much of the Yorkshire coast, 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.

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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.

There are concerns a small business grant scheme launched by Rishi Sunak in response to coronavirus may be open to abuse. Picture: GettyThere are concerns a small business grant scheme launched by Rishi Sunak in response to coronavirus may be open to abuse. Picture: Getty
There are concerns a small business grant scheme launched by Rishi Sunak in response to coronavirus may be open to abuse. Picture: Getty | 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. Altus, which based its figures on analysis of Valuation Office Agency statistics, said there is no available data on how many are genuinely being let to the public.

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.”

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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.

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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. The consultation report said “the Government is concerned that owners of properties that are not genuine businesses may reduce their tax liability by declaring that a property is available for let, but making little or no realistic effort to actually let it out”.

Nationally, former Liberal Democrat leader Tim Farron has said he believes there may be as many as 1,500 people in the South Lakes area of the Lake District that have properties masquerading as holiday lets and are therefore able to claim from the business fund.

In Cornwall, one councillor accused second home owners of “taking the p***” after it was revealed the county’s local authority had given £50m in grants to holiday lets.

The Bed and Breakfast Association has said it is "outraged" at reports of second home owners making claims under the grant scheme when many of its members have been excluded from applying because they pay council tax rather than business rates.

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But Martin Sach, chief executive of the Holiday Home Association, said many legitimate tourism businesses were in desperate need of the financial support that has been offered.

However, he 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.”

Coun Peacock said second homes declaring themselves as small businesses is a long-standing problem.

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“I get very frustrated and angry about it to be quite truthful. Before you even get to the £10,000, they are not paying council tax at all. There is nothing we seem to be able to do about it.

“They have to apply for it and I’m hoping their consciences mean they will not apply for it. The funding is there to help the businesses that need it.”

She added there are many second home owners who have not opted to declare themselves as businesses for tax reasons.

“I’m not saying it is everyone. But I’m very concerned. There has been an awful lot of money that has had to be paid out by the Government which somebody has to pay for in the long term. If somebody is taking advantage of this it doesn’t seem right to me.”

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Craven District Council has said it has raised concerns with the Government about the rules of its coronavirus grant scheme which has left it unable to help struggling bed and breakfasts while handing over millions of pounds to holiday home owners who do not pay local taxes.

A spokesperson said: "The council has no say over who benefits from the Government grant scheme; we are obliged to implement the scheme under the regulations set out by the Government.

"However we have previously identified concerns with the classification of second homes as small businesses and this is something we have raised with the Government in the past and will continue to do so.

"We are aware of the concerns of local B&B owners and we are also raising these concerns with the Government."

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But Leeds Council, which has provided £430,000 to 43 holiday lets in its area as part of over £118m given to local businesses so far, said it was not concerned about the legitimacy of those receiving funding in its area.

“It is an incredibly stressful time for small businesses and we are glad that the council has been able to move quickly to begin paying out grants,” a spokesperson said.

“The council consistently checks the legitimacy of registrations of holiday lets and so we do not believe this support that is vital for so many business owners has been misused. We recognise this may be more of a concern in places where economies are dominated by tourism.”

The Yorkshire Post contacted the Ministry of Housing, Communities and Local Government for comment but was referred to the Department for Business, Energy and Industrial Strategy, who are yet to respond.

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