MHCLG Consultation Business rate treatment of self-catering accommodation

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MHCLG (Ministry of Housing Communities & Local Government) have consulted on proposed changes to the regulation governing the treatment of self-catering accommodation in England for business rate purposes.  They are proposing to amend the rules to close a potential loophole that allegedly allows some second home owners to erroneously claim business status and small business rate relief and, thus, avoid paying both council tax and any business rates if the property is rated at £12 k or less.  Essentially the proposal is that the property must be available for at least 140 days and let for at least 70. This is in line with similar regulation for other accommodation types in England and for self-catering and other accommodation in the other home nations.

Our understanding is that the relief is funded by Central Government in the first instance.  Because of the complexities of business rates and funding formulas we are not totally clear on the actual impact on Local Authority funding in every case, either as it is now, or what it might be if and when 100% local retention (and carrying the cost of relief?) becomes the norm.  Regardless it is of major concern, given the pressure on public finance and the resulting pressure on discretionary services, include those that support the visitor economy.

Having sought and received comments, I have contributed to the Tourism Alliance’s response. Given the wide scope of its membership interests, the Alliance has not unreasonably taken a very moderate, middle of the road position, largely supporting the proposals as presented.  On balance I think British Destination members would largely support the stance and I might normally have left it at that.  However, on this occasion I have taken the opportunity to write separately supporting the Tourism Alliances response but also highlighting some of the more extreme opinion.

I have done so because at the heart of this is a serious and seemingly well-founded allegation that scares public resource is being used by some to effectively subsidise the cost of second or holiday home ownership under the guise of small business support.  Left unchecked that is potentially political dynamite, it’s a potential PR and public policy nightmare for the “tourism industry” if it/we are seen to have condoned or unwittingly  supported it and above all, the likely future backlash could do some serious collateral damage to the interests of genuine self-catering accommodation businesses and quite possibly others currently legitimately in receipt of small business relief.

For these reasons it is important that MHCLG don’t just try to resolve the issue on first attempt but actually succeed.  I am not an expert in the field of business rates but I can see a number of possible flaws in the plan and have therefore asked a few simple questions in the hope that MHCLG might be encouraged to think more deeply about these and try to strengthen the approach where there proves to be merit in the concerns raised.  I hope that the majority of the membership would support the rational, if not necessarily the detail or the style I have used:

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