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The First Minister has dismissed fears that a legal loophole is to blame for cash-strapped authorities being denied much needed revenue as holiday home owners register their properties as businesses to avoid paying council tax.

Anglesey Council’s Executive has approved a public consultation on raising the 25% council tax premium on second and empty homes to 35% and 100% respectively in a bid to help local first-time buyers climb onto the property ladder.

Gwynedd already charges 50% on both designations, with the scheme expected to bring in an extra £2.7m a year to council coffers.

But councillors on either side of the Menai Strait have raised concerns that a legal loophole is being exploited by some holiday home owners which means the authorities receive no income from them at all.

Speaking in the Senedd this week, First Minister Carwyn Jones expressed his view that the law was robust and any changes would be down to the Valuation Office Agency which comes under the UK’s HM Revenue and Customs.

However he went on to confirm that ministers are assessing the situation, which could open the door to further action in future.

The number of residents making use of this loophole has not been revealed but while holiday homes registered as businesses should theoretically pay business rates, they do not have to pay council tax as long as long as their holiday home is available to let for 140 days a year. In doing so most second homes are liable for small business rate relief, so in reality many do not pay any business rates at all.

Anglesey Council’s deputy leader this week, proposed the authority write to the Welsh Government in a bid to close off the option of registering holiday homes as businesses.

Raising his case in the Senedd Ynys Mon AM Rhun ap Iorwerth, said: “We know the gravity of the problem— 36% of homes sold on Anglesey in 2017-18 were second homes or buy-to-lets.

“The figures are even higher in Gwynedd, and that’s very concerning indeed.

“I’m very supportive of measures such as charging more council tax on second homes as a way of making people think twice or to bring more funds into local authority coffers.

“But there is a pattern emerging now, where more and more people, rather than paying council tax on their homes, are registering them as business properties so that they would then have to pay business rates.

“But, as small businesses, they receive full business rate relief, and that is expensive for local authorities.

“Does the First Minister agree with me that this is a loophole that needs to be closed, and what is the Government considering doing in order to close that loophole?”

In response, the First Minister said: “I don’t think there’s a loophole, but the law is very clear — it’s stronger than in England.

“It is a matter, of course, for the Valuation Office Agency, but if somebody wants to change their status, where they change from paying the council tax to paying business non-domestic rates, they have to show evidence that that is correct.

(Image: Daily Post Wales)

“They can’t just state that; they have to provide evidence. If that evidence is weak, or the evidence isn’t sufficient, the Valuation Office Agency can reconsider what they’ve done, and then, of course, they can give them a bill that could go back years regarding paying the council tax.

“So, ensuring that the law is considered is the point here, and I think the law is clear enough, but it’s up to the Valuation Office Agency to police the situation.”

However, he added: “The Cabinet Secretary for Finance is evaluating the impact of the introduction of council tax premiums.

“That does include a survey of local authorities, to assess how many properties have switched from council tax to non-domestic rates.

“Once that survey is complete, we can then see what the scale of the problem is, and whether there is a need to do more to ensure that people pay properly, according to the status of the property that they own.”