Wales’ tourism industry urges Welsh Government rethink on self-catering taxation plans

Tourism and hospitality organisations have offered the Welsh Government their expert insight to protect legitimate self-catering holiday businesses from unintended consequences of proposals to clamp down on second home ownership in Wales.

Wales Tourism Alliance (WTA), UK Hospitality Cymru (UKHC) and Professional Association of Self Caterers UK (PASC UK) are calling on the Welsh Government to heed new evidence collected in a survey of more than 1,500 self-catering businesses, across Wales.

The survey, compiled jointly by the three membership organisations, has been sent to all Members of the Senedd, all Welsh MPs, Visit Wales and key stakeholders. It represents the views of a quarter of Wales’ self-catering operators, who own around 8,000 properties.

The Welsh Government is proposing stricter rules on self-catering accommodation qualifying for business rates rather than council tax.

Currently, self-catering properties in Wales must be available to let for a minimum of 140 days in any 12-month period, and actually let for at least 70 days to qualify for business rates rather than council tax.

Under the new proposals, properties must be available to let for at least 252 days and actually let for at least 182 days to qualify for business rates – an increase of 160%.

From April 2023, a self-catering business not meeting the new threshold would incur council tax for a second home, instead of business rates. Welsh county councils will have the power to increase council tax on all these business by up to 300%.

WTA, UKHC and PASC UK urge the Welsh Government to:

• Increase the occupancy threshold for holiday let businesses from 70 to 105 days, in line with HMRC taxation rules.
• Exempt properties, which are limited by planning permission to be short term commercial lets, such as farm diversification or buildings within the boundaries of the owner’s own home, from additional council tax payments if they do not hit the 105 days occupancy target.
• Amend occupancy threshold allowances to take account of repairs, property improvements and closure due to ill-health or caring responsibilities.

In return, WTA, UKHC and PASC UK are offering to work with Visit Wales to improve the profitability and sustainability of self-catering businesses by driving up quality and nightly yield.

They are also keen to work with Visit Wales, Welsh Government and other partners to drive the green, low-zero carbon agenda in the sector.

The survey reveals that the proposed occupancy threshold will have a “disproportionate and damaging economic impact” on the self-catering sector, individual livelihoods and communities.

The survey findings demonstrate that the proposed changes will not deliver the Welsh Government’s goal of creating more affordable housing in communities where second homes have made property prices too expensive for most local people.

The proposals could not have come at a worse time for the tourism industry in Wales, with rapidly rising energy and fuel prices, a cost-of-living crisis, the opening up of overseas tourism, staff shortages, rising employment and procurement costs, the return to 20% VAT and the Ukraine war.

Many family-run, micro holiday letting businesses surveyed said they will close if the Welsh Government introduces the proposed changes. The properties could subsequently be sold to buyers from outside of Wales or be re-absorbed into owners’ own homes.

A joint statement by the organisations said: “As a tool to bring properties back into a market which is affordable to local people, it will not work. Rather, it will reduce local owners’ ability to earn an income and cause a decline in secondary jobs in hospitality, retail, house maintenance and cleaning.

“It will not safeguard the Welsh language as these businesses will be lost to wealthier outsiders prepared to meet the higher costs of having a second home or self-catering businesses in Wales.”

“Businesses agreed that the 70-day threshold was too low and have consistently recommended an increased to 105 days. Raising the bar to 182 days will have a hugely detrimental impact on the genuine businesses that operate in the sector.

“It is far above average occupancy and will simply drive prices down as owners race to meet the 182 days target.

“A decline in the availability of self-catering businesses will deter tourism, on which many hospitality businesses depend. Local pubs, restaurants and other hospitality and leisure businesses will see a severe drop in footfall at key tourist times.

“The industry supports higher thresholds to help distinguish between professionally run self-catering businesses and second homes.  Unfortunately, these proposals don’t reflect the outcome of the Welsh Government’s own consultation on the issue and we risk losing valuable, locally-owned, small businesses as a consequence.

“We urge the Welsh Government to review their figures and reconsider the damage that these proposals will cause to the economic sustainability of communities they purport to safeguard.”