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Last Updated: Thursday, 5 August, 2004, 14:06 GMT 15:06 UK
Ministers target holiday home tax
Rural houses
Some villages have a high proportion of holiday homes
The council tax discounts received by holiday home owners in Scotland are set to be slashed.

The Scottish Executive had been under pressure from local authorities to end the 50% tax reduction on second homes.

Finance Minister Andy Kerr announced that councils would now be given the power to set their own rate at anywhere between 10% and 50%.

He said cutting the rate could bring in an extra 25m a year. Additional money will be used to build social housing.

Many second homes remain empty for most of the year, but local councils claim they still have to provide them with services.

Many of the owners use their second properties exclusively as holiday homes, saving themselves several hundreds of pounds a year in tax.

Andy Kerr
All additional income raised will be retained locally and used to provide new-built affordable social housing in areas determined by councils
Andy Kerr
Finance Minister
One of the strongest campaigners against the tax discount has been Highland Councillor Michael Foxley.

He said: "We think it's unfair, we think it's discriminatory when they use the services.

"We have a major problem in the Highlands with affordable housing for local people - in some of the villages in my area over 90% of the housing stock are holiday homes."

Mr Kerr said that second home owners contributed to local communities in many areas.

But he said: "Second homes and properties which have been left vacant over a number of years can cause problems for local areas, including limiting the supply of affordable housing for local people.

"After careful consideration of the responses to our consultation on this complex issue, we have decided local authorities should have the power to vary the council tax discount on second homes and long-term empty properties within their area by between 50% and 10%.

Vary the discount

"All additional income raised will be retained locally and used to provide new-built affordable social housing in areas determined by councils."

The change will take effect from the start of the next financial year.

The executive estimated that councils could raise 25m if they all cut the discount to 10%.

Councils will also be able to vary the discount within their area, allowing them to target only those areas where second homes are a particular problem.

If this tax discount is abolished whereby people are paying their council tax but have no say in how it's spent and that would be wrong
Brian Monteith
Tory MSP
The executive argued that retaining the 10% discount would give owners an incentive to tell the council that a property is a second home or long-term empty.

The mandatory 50% discount will be retained for some properties, including purpose-built holiday homes and those owned by people living in tied accommodation.

Scottish National Party MSP Fergus Ewing said people who are wealthy enough to have a holiday home should pay the same council tax as everyone else.

Since being elected for the Inverness East, Nairn and Lochaber region in 1999 he claims more than 125m pounds in has been lost since then.

He said: "After five years spent opposing our plans to end this special discount, the executive has finally conceded the argument.

"The additional revenue from second homes will be welcome but it must only be a start."

However, holiday home owners argue they are only maintaining their family homes and do not use the full range of council services and therefore are due a reduction in charges.

The Conservatives are worried about the principle of councils being able to increase tax bills for owners who have no vote in the area.

Tory MSP Brian Monteith said: "We could have a situation if this tax discount is abolished whereby people are paying their council tax but have no say in how it's spent and that would be wrong."

Council Tax form
Councils will be able to vary the charge in their area
Many rural communities will have to weigh up the loss to council revenues of giving the discount to second-home owners against the economic value of bringing visitors to the area.

Mabel Macarthur, chair of Tiree community council, said: "There's certainly no way we'd like to stop the tourists as our island economy depends a lot on them during the summer.

"What most of the locals here really object to is that people buy second homes at an inflated price and let them out for a price between 300 and 600 a week and then they are still having the reduction in council tax."

Gavin Corbett, of housing charity Shelter Scotland, said: "The only practical way to change patterns of ownership would be through the planning system or through changes to land tenure.

"However, changes to council tax discount could help the tens of thousands of people stuck on house waiting lists if all the extra revenue is committed to providing affordable homes. That is what councils and the Scottish Executive must now do."


SEE ALSO:
Tax hit for housing market
05 Aug 04  |  Scotland
Scotland 'dearer to run a house'
19 Jun 04  |  Scotland
Council tax system to be reviewed
16 Jun 04  |  Scotland
SSP sets out 'service tax' plan
27 May 04  |  Scotland
Alliance holding back axe on tax
06 Mar 04  |  Scotland


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