Tourism industry welcomes review of holiday let tax rules

Mark Mansfield

Tourism leaders have welcomed a Welsh Government review of controversial tax rules for self-catering accommodation, saying the current system has left genuine businesses facing large council tax bills.

Mid Wales Tourism and the Wales Tourism Alliance (WTA) have backed a 12-week consultation examining the requirement for holiday lets to be occupied for at least 182 days a year to qualify for non-domestic rates.

The consultation, which opened on Friday, will consider whether the threshold should be reduced and proposes five new exemptions for properties that could not reasonably be used as permanent homes.

Since April 2023, self-catering properties in Wales have had to be available to let for at least 252 days and actually occupied by paying guests for at least 182 days during the previous 12 months to qualify for non-domestic rates rather than council tax.

The rules were introduced after the number of self-catering properties registered for non-domestic rates almost trebled between 2013 and 2023, from around 4,000 to more than 11,000.

But tourism businesses have repeatedly argued that the 182-day requirement can be difficult to achieve, particularly in rural areas and outside the main holiday season.

Welsh Government figures show around 40% of affected businesses are failing to meet the threshold.

WTA chairman Rowland Rees-Evans said the figures did not show how many businesses were cutting prices heavily in an effort to secure enough bookings to qualify.

“We know there are many self-catering businesses struggling because they have been unable to reach the 182-day threshold for a range of reasons,” he said.

“As a result, they have been faced with large Council Tax bills that they can ill afford.

“Welsh Government figures show that 40% of these businesses are not achieving 182 days, but what the figures do not show is how many of the remaining 60% are heavily discounting their prices simply to reach the target.

“This reduces profitability and threatens the future viability of those businesses.”

Exemptions

The government is considering five new exemptions aimed at self-catering accommodation that could not realistically be used as a permanent home.

They include properties forming part of a wider business, large multi-unit developments, accommodation subject to relevant planning restrictions, properties within the curtilage of an owner’s home and holiday accommodation on farms.

Zoë Hawkins, chief executive of Mid Wales Tourism, which represents more than 600 tourism and hospitality businesses across Powys, Ceredigion and Meirionnydd, said the consultation was a “long-awaited” opportunity to address problems with the system.

“The policy in its current form has resulted in genuine tourism businesses being treated in the same way as second homes,” she said.

“Many are purpose-built units, farm diversification businesses or properties that form part of a family home and could not reasonably be used as permanent residences.

“The proposed exemptions are therefore hugely important. If introduced, we hope they will help ease the considerable financial pressures and uncertainty facing many families, businesses and communities across rural Wales.”

‘Save the sector’

The Professional Association of Self-Caterers UK (PASC UK Cymru) also welcomed the announcement by the Welsh Government.

Alistair Handyside MBE, Executive Chair of PASC UK, said: “We welcome the fact that the Welsh Government has listened to the evidence and recognised that the current 182-day threshold requires review.

“That is an important step forward and one which reflects constructive engagement with new Ministers, Members of the Senedd and officials. A welcome change to the stubbornness of the last Welsh Government.

“However, the consultation is only the beginning. While the proposed range is undoubtedly lower than many feared, we remain concerned that it is still too high for a significant proportion of genuine self-catering businesses operating in rural and coastal Wales.

Nicky Williamson, PASC UK’s Welsh Policy Adviser, said: “This consultation must be driven by evidence. We want every operator to explain how the current rules affect their business and why a realistic threshold is essential if Welsh tourism is to remain competitive.

“Our objective has never been to remove the distinction between genuine holiday businesses and second homes. It is to ensure that viable tourism businesses are not penalised by an occupancy requirement that many simply cannot achieve.”

PASC UK Cymru will shortly publish detailed consultation guidance to help operators prepare evidence-based responses and will host a sector-wide webinar on Wednesday 5 August at 10am to explain the proposals and answer questions.

The association is encouraging every self-catering operator in Wales to participate. “Government has opened the door, this is our one chance to save the sector in Wales” added Handyside.

‘Balance’

Cabinet Minister for Finance Elin Jones said the Welsh Government had committed to keeping the 182-day rule under review.

“I have heard representations from a number of businesses that are making meaningful contributions to their local economies but are unable to meet the current threshold,” she said.

“This consultation will help us find a solution that works better for everyone, including businesses, local authorities and local areas.

“I am committed to getting the balance right, keeping homes in our communities while giving tourism the support it needs to thrive.”

The consultation will remain open until October 23, with the review of the 182-day threshold expected to be completed by the end of the year.

Any changes would require legislation and could come into force from April 1, 2027.

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