(by Rebecca Evans MS, Minister for Finance and Local Government, 24 May 2022)
On 2 March 2022, I announced the next steps being taken by the Welsh Government, following our consultation on local taxes for second homes and self‑catering accommodation. The steps form part of our plans to ensure property owners make a fair contribution to the communities where they have homes or run businesses. This work, in turn, is part of the Welsh Government’s three-pronged approach to addressing the impact that large numbers of second homes and holiday lets can have on communities and the Welsh language.
The views conveyed in the consultation, including those from respondents representing the wider tourism industry, clearly support a change to the criteria for self-catering accommodation to be classified as non-domestic. Respondents were of the view that the majority of genuine holiday accommodation businesses would be able to satisfy increased letting thresholds, and a wide range of possible alternatives was suggested. Increasing the thresholds will provide a clearer demonstration that the properties concerned are being let regularly and are making a substantial contribution to the local economy.
Following our consultation, the Welsh Government is of the view that properties let out as self-catering accommodation on an infrequent basis should be liable for council tax. Increased letting criteria will ensure that self-catering properties are classed as non-domestic, only if they are being used for business purposes for the majority of the year.
I, therefore, announced an increase to the number of days, within any 12-month period, that a self-catering property is required to be made available to let, from 140 to 252 days, and actually let, from 70 to 182 days. A technical consultation on the draft Non-Domestic Rating (Amendment of Definition of Domestic Property) (Wales) Order 2022 (“the Order”) ran from 1 March to 12 April 2022. The consultation sought views on the clarity and practical application of the draft legislation. I have published a summary of responses.
Responses to the technical consultation did not raise any issues of technical clarity that are considered to require amendment of the draft legislation. I am today confirming that the Welsh Government will proceed with the legislation as drafted and consulted upon. The Order will come into force on 14 June 2022 and have practical effect from 1 April 2023, applying the amended criteria from that day onwards. Property owners intending to meet the amended criteria should aim to do so during the 2022-23 operating year, but compliance with the criteria will not be assessed until after 1 April 2023.
I recognise the strength of feeling among self-catering operators and have listened to the representations from individual businesses and industry representative bodies. There is limited evidence available in relation to some of these considerations and I am grateful to the sector for providing additional information they have gathered from their members. This has been taken into account in completing the Explanatory Memorandum and Regulatory Impact Assessment, which makes use of the available evidence. I recognise that the stronger criteria may be challenging for some operators to meet. The purpose of the change is to help ensure property owners are making a fair contribution to local communities, for example by increasing their contribution to the local economy through greater letting activity or by paying council tax on their properties. The Welsh Government’s policy priority is to support sustainable communities and affordable housing, as set out in our three-pronged approach.
The Welsh Government recognises that some self-catering properties are restricted by planning conditions preventing permanent occupation as someone’s main residence. The Council Tax (Exceptions to Higher Amounts) (Wales) Regulations 2015 provide for an exception from a council tax premium for properties restricted by a planning condition preventing occupation for a continuous period of at least 28 days in any one‑year period. In light of the changes we are introducing to the letting criteria, I am also exploring whether further amendments to these regulations are necessary in advance of the changes taking practical effect.
I will also be issuing revised guidance to local authorities on additional options that are available in the event that self-catering properties restricted by planning conditions do not meet the letting criteria.
As part of the Co-operation Agreement with Plaid Cymru, we are committed to taking immediate action to address the impact of second homes and unaffordable housing in communities across Wales, using the planning, property and taxation systems. As we continue to progress the package of measures and drawing on the latest evidence base, we will keep under constant review the whole range of levers available to use and how they may be deployed most effectively to meet our policy objectives and avoid any unintended consequences.
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