Second home owners in North Yorkshire look set to be the first in the country to pay double council tax after an investigation into avoidance loopholes concluded there is potential for the charge to be avoided.
In an attempt to help improve access to housing for local people, North Yorkshire County Council’s executive will on Tuesday consider launching a 100 per cent council tax premium on second homes and premises which have been left empty for a year or more from April 1, 2024.
The move follows last year’s Rural Commission recommending a charge is levied on second homes and used to finance affordable housing, helping to reverse the ongoing exodus of young families from areas where house prices are many times above average wages.
It also comes two months after the authority’s leading members postponed a decision over the premium after numerous concerns were raised over whether it would encourage council tax avoidance, for instance by second home owners transferring properties transferring to business rates.
Some opposition councillors have claimed the premium will prove difficult to implement while people who have owned properties in the county for decades say the move will simply make second homes the preserve of the rich.
In a report to the executive, officers forecast more than £14m a year could be raised from using the levy being introduced by the government in the Levelling Up and Regeneration Bill.
Research has shown Richmondshire could generate about £1.8 million through the premium, while the Craven, Harrogate and Ryedale areas could each provide about £1.5 million in extra revenue. Hambleton could provide £1 million and the Selby district a further £260,000.
Addressing the concerns over tax avoidance loopholes, the report states as council tax rates for second homes mirror those of main residences there may be issues with the classification of properties and the application of a second homes premium “may prompt owners to reclassify properties for genuine reasons”.
The report highlights that properties only need to be available to let for more than 20 weeks in a year to be classed under business rates and that the only detail needed to support such a claim is evidence of an advertisement for let for the property.
From April second homeowners must also prove the property was let for at least 70 days.
The report states the council would use “mechanisms available” to clamp down on couples who own second homes and falsely claim they are living separately and warns of financial penalties if bogus information is provided.
Officers added while the proportion of second homes in Wales paying the 100 per cent premium had fallen by up to nine per cent since being introduced there in 2017, it is unclear whether the downward trend has been caused by avoidance loopholes or by bringing second homes back into use as housing.
Ahead of the debate, the authority’s Green Party group coordinator, Councillor Andy Brown said areas facing “being hollowed out of permanent residents” there was a strong case for raising the council tax not just on second home owners, but “anyone who rents a property out using short term online letting companies”.
He added it would take skill to design a local property tax to impact on rarely used second homes rather than North Yorkshire’s expansive tourism industry.