James Murray, a junior Treasury minister, confirmed in a written parliamentary answer that his department was reviewing “the tax treatment of short-term lets, such as self-catering accommodation”.
He said “concerns have been raised” about second-home owners using small business rates relief to manage tax liabilities.
The suggestion is that some second-home owners are avoiding council tax by claiming their second homes are holiday lets. But providers of holiday lets have pointed out rules have already been tightened to prevent that.
One possible change is for all self-catered accommodation to be subject to council tax instead of business rates. It would apply to properties advertised on Airbnb as well as those advertised through more traditional holiday websites.
Alistair Handyside, chairman of the Professional Association of Self-Caterers, said such a change would cost the average holiday-let owner between £1,000 and £3,000 per year, at a time when they were only making around £5,000 profit.
He said: “The average self-catering business owns 1.2 properties and it is usually a second income, often run by working mothers or retired people, who have already been hit by 25 government interventions in the past four years.
“The self-catering sector is already declining and a lot of people will decide it’s just not worth it any more. I can tell you that the government already takes more money out of my business every year than my wife and I do.
“What the government doesn’t realise is that holiday lets provide the bed space for people visiting areas that don’t have the hotel spaces that London and big cities have. If the bed spaces decline, so does the local economy, because pubs, restaurants, butchers, all sorts of businesses only stay in profit because of the annual influx of tourists.
“So I would just say to the government, be careful what you wish for.”
The Telegraph has been campaigning to save Britain’s pubs, which are facing cuts to Covid-era relief, as well as rises in National Insurance payments and the minimum wage.
‘Holidaymakers will choose abroad’
Holiday lets in England are currently treated the same way as all small businesses. If they have a rateable value of £12,000 or less and they are the only property used by the business, they pay no business rates. Business premises with a rateable value of £12,001 to £15,000 receive a discount on business rates on a sliding scale.
In order to prevent people avoiding council tax on second homes by pretending they are a business, recently introduced rules mean that to qualify for small business rates relief, a property must be available for rental for at least 140 days per year and commercially let for at least 70.
Mr Handyside suggested money that people would have spent on holidays in the UK would end up being spent abroad if self-catering accommodation became scarce, as families would opt for package holidays in Europe if they could not find a holiday cottage here.
Self-catering accommodation in the UK is already 30 to 50 per cent more expensive than the equivalent in France or Spain. English businesses pay higher rates of tax, including VAT, and are subject to much tougher – and more expensive – regulations.
There are around 79,000 registered holiday lets in England and another 8,700 in Wales, with those figures declining in recent years.
A Treasury spokesman said: “The Chancellor is fully focused on his priorities, to give families and businesses a bit of breathing space, back British jobs, and drive growth in every postcode, underpinned by a commitment to meet the fiscal rules.
“As has always been the case, decisions on tax are a matter for the Chancellor to set out at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
