During the Second and Third Assemblies, widespread concern about the impact on Tourism Businesses of then Welsh Assembly Government proposals to change the qualifying criteria for self-catering accommodation was expressed by trade bodies, including the Wales Association of Self Catering Operators and Welsh Tourism Alliance Members.
Further to this, Welsh Government legislation recognised that some dwellings could be used either as second homes or as commercially let self-catering holiday accommodation.
The Non-Domestic Rating (Definition of Domestic Property) (Wales) Order 2010 stated that to qualify as self-catering accommodation, a dwelling must be available to let for at least 140 days in a 12-month period and actually let for at least 70 days.
The Order was revised and strengthened in 2016. The qualification periods were retained, reflecting the public consultation responses.
As the Equality, Local Government and Communities Committee Report on “Empty Properties,” published last Thursday, states “the criteria for self-catering accommodation strikes a balance”.
As our report also states:
- Dwellings which meet the criteria may be recorded on the non-domestic rating list rather than the council tax list.
- Dwellings which do not meet the criteria, including second homes kept mainly for private use, are liable for council tax.
- Valuation lists for council tax and non-domestic rating purposes are compiled and maintained by the Valuation Office Agency.
- The Agency is independent of the Welsh Government.
- For a property to be defined as self-catering accommodation and moved to the rating list, the owner must provide evidence to the Valuation Office Agency that the property meets the criteria.
- If a local authority believes a property should be listed for council tax and has evidence of this, it is obliged to share such information with the Agency and the Agency will consider the evidence.
- Self-catering accommodation which falls below a specified rateable value may be eligible for Small Business Rates Relief (SBRR). The proposals, including whether there should be any additional exceptions, were also subject to public consultation.
Even within this criteria, I have been asked by farming families from Flintshire to Anglesey, investing to diversify their businesses, to represent their concerns that the 70 day occupancy rule is too long and inflexible for a short holiday season especially - for a new-start self-catering business.
The Housing Act (Wales) 2014 added discretionary powers for local authorities to apply premiums of up to 100% to the council tax bills for long-term empty properties and second homes – where authorities can set the premium at any level up to 100% for either or both.
The decision to apply a premium is a matter for individual local authorities.
Gwynedd, with almost 5,000 second homes, introduced a 50% premium on Second Homes– as, oddly, did Flintshire.
Conwy introduced a 25% premium.
However, Gwynedd expressed concern that “many of these properties would be subject to attempts to avoid the additional tax if Second Home Owners decided to let out to customers for more than 70 days a year” .
Responding to me in Committee, Gwynedd Council’s representative stated “I know that this idea that a lot of our empty properties are owned by people from out with Gwynedd isn't necessarily, isn't complete, because many people within Gwynedd own these vacant homes, as you say, because they've inherited property and they want to do something with it”.
When I said to him
“Some second homeowners are very, very wealthy, some less so” and asked “to what extent is the circumstance you're describing genuine, where somebody might actually be letting the property for more than the eligible period during the year for affordability reasons? And to what extent is it trying to bypass the cost?”, he replied “the transfer of domestic council tax properties into business premises in Gwynedd is significant.
We're talking over 1,000 at the moment that have transferred. We're talking about hundreds every year. And what they need to do is to assure the valuation office that the property has been available for 140 days and has been let for 70 days, and they can then transfer it”.
He added that “about 98 per cent in Gwynedd—have small business rates relief. . So, the loss to the public purse in the tax take is in the millions”.
Working with the Valuation Office, the Welsh Government must therefore give attention to this perhaps inevitable consequence of its legislation.
However, as I evidenced earlier, they must penalise neither the contribution made by self-catering businesses to our tourism economy - nor second home owners forced to generate extra income on affordability grounds but who are playing by the rules.