Second homeowners exploiting “unethical loophole” to claim £3.5m in virus cash
shepwayvox
Throughout the pandemic second homeowners across our district have been able to claim approx £3.5 million in covid grants designed to help small businesses weather the coronavirus crisis. At the same time they’ve been able to avoid paying in excess of £250,000 in council tax between them and still receive the same services as residents of the district.
Owners of more than 140 holiday properties in the Folkestone & Hythe District will have been eligible for approx £25,000 by the time the economy opens up on April 12th, through the government’s emergency small business grants fund.
In 2017/18 there were 590 second homes of which 90 plus were let. This number has risen to just over 140 according to the Council’s Dec 2020 business rates list. But local town and district councillors estimate many of these 140 plus second homes have had their designation flipped by their owners from residential to commercial in order to avoid paying council tax. Now the same homeowners have received substantial payouts, they complain.
In order to qualify for the government coronavirus support grant, properties must have a ratable value — the amount it could be rented for annually — of a maximum of £15,000 and be available to rent for 140 days.
The Department for Business, Energy and Industrial Strategy said:
These strict criteria will ensure that government funding is directed to those who genuinely need it.”
The government has said it will prosecute anyone caught falsifying their records to gain additional grant money.
But there’s a big difference between making it available for rent and actually renting it,
several district councillors have said.
The reason people [say they are available] is that then they don’t have to pay council tax. It takes them on to business rates and, because they are below the [£15,000] threshold, they don’t pay anything.
Council officers we spoke to off the record, made it clear enforcement of the rules is hard because second homeowners are not required to show evidence of lettings in order to claim their property is a commercial venture.
Rishi Sunak, the chancellor, has sought to close what he calls a “business rates loophole”. In November 2018, when local government minister, he launched a consultation to look into the issue, noting “concerns that the current arrangements do not provide strong enough protections against abuse.”
The consultation has yet to conclude, and homeowners who are abusing the system are still free to claim the government’s coronavirus grants.
This is a system that needs looking at, and its needs to be looked at urgently. The sums in our district are approx £3.5 million paid out and in excess of £250,000 lost in council tax. Scale that up across the country and that’s a sizable problem. They [the owners] pay nothing and receive all the same services as you and me.
said a very irate New Romney Town Cllr.
Folkestone & Hythe District Council have distributed grants to holiday homeowners from the money they’ve received from central govt and which is available to small businesses, – Council officers face a challenge distinguishing between legitimate holiday lets and those gaming the system.
According to the estimates of our council, around a fifth of local properties eligible for the grant are holiday homes in name only.
The advice from central government is
If they’ve been accepted as a small business and put the application in for the initial £10,000, they got that. There was nothing we could do to prevent them receiving the money. By the time we open up again on the 12th [April], they would have eligible for up to £25,000, but many of these homes have been empty, but were advertised on airbnb sites as for rent.
said a Hythe Town Cllr.
Privately local parish, town and district councillors have long complained that second-home owners are costing them hundreds of thousands of pounds in lost council tax by designating their properties as businesses.
A lot of the second houses across the district are rarely let, and when they are it’s to family and friends for a few weeks, it’s a growing problem. We know these homes are advertise on airbnb sites but so few ever appear to be let throughout the year.
said a Council officer who did not want to be named.
In the last four years our Council has lost in excess of £1 million in council tax receipts as a result of properties being designated as holiday homes, according to to a spokeperson from the Valuation Office Agency, who compile and maintain the list for council tax and business rates.
A Lydd Town Cllr made it clear:
It’s a system which is wholly unfair and being thorough flouted by the few. Our local fishermen are offered little support other than from universal credit, but are seeing Londoners with second homes who will have received approx £25,000 by the time the economy opens up on the 12th April. It’s a tough pill to swallow.
The exemption of second homes from council tax is a “peculiarity”, given they use the same council services as other properties.
According to a number of town and district councillors, normally-vacant holiday lets certainly filled up at the beginning of the pandemic, as their owners sought refuge from cities during the first nationwide lockdown.
One Dymchurch Parish Cllr has received angry phone calls throughout the pandemic, from local residents, who claim these DFL’s [Down from London] have come down the motorway to self-isolate and potentially brought the virus with them – it shouldn’t be allowed.
In our neck of the woods second homes declaring themselves as small businesses is not a big problem but rather a growing problem, which the pandemic has excaberated. Nobody likes a freeloader and especially not a rich freeloader. We’ve flagged this to district, but it appears there’s little they can do, or want to do, who knows.
Until the consultation is over, and until Parliament act, second home owners will be able to flip their homes and avoid paying vital council tax the district so desperately needs. The sooner this changes the better it’ll be for us all.
