Section 5 - How will Empty and Second Homes be Taxed?
50. Some people own more than one home. When it is not anyone's main home, then it is considered to be a "second home". In some areas, the ownership of second homes can be beneficial for the local community, but in other places the amount of second homes can make it harder for local families to find affordable housing. Under the existing council tax regime, owners of second homes and long term empty properties pay up to 90% of the full council tax bill on that property.
51. The Government believes that a continuing tax specifically targeted on second homes and long term empty properties is fair - it is reasonable that those who are fortunate enough to have two or more homes pay an extra contribution towards taxation. Such a tax could also encourage owners of these homes to make them available for occupation so as to avoid paying the tax.
52. There are three main aspects to creating a fair second homes and long term empty properties tax:
- Identifying the properties
- Setting a fair amount of tax
- Collecting the tax
Identifying Second Homes and long term empty properties
53. Identifying these properties under the current council tax system is relatively straightforward. Every home in Scotland gets a council tax bill and to qualify for the second home discount the owner needs to demonstrate that their main home is somewhere else. When council tax is abolished, homes will no longer receive a council tax bill and there will be no incentive for people to tell us that a building is their second home or is a long term empty property. If we were to continue with a tax on these properties, we would need to find a new way of identifying them.
54. We already hold a detailed record of current second home and long term empty property ownership through the council tax system, and under a new tax, we would need to keep this up to date in the future. We understand that HMRC will need to undertake national exercises to verify Scottish residency and ensure accurate tax records. The land registry also maintains information about domestic property and ownership. There are therefore clear opportunities for us to work across government in identifying second homes by using data that already exist or will be required in the future to administer local income tax.
Setting a Fair Amount of Tax for Second Homes and Long Term Empty Properties
55. It is our general intention to raise about the same amount of money from taxing such properties as is currently raised under the council tax system. However, since Scottish Assessors may no longer be maintaining a council tax valuation list, it may not make good practical and financial sense for them to value second homes as the basis for taxation. There is a range of options to base a second homes tax on but because second homes affect various areas differently, a one-size fits all approach across the whole of Scotland may not be appropriate. We are interested in creating a tax that would allow local authorities to play a role in determining how much tax owners of these properties in their areas pay, based on their superior knowledge of local circumstances. Local authorities for whom such properties have reduced the supply of affordable housing may wish to set a higher level of tax, which could be used to invest in local housing. Local authorities that wish to encourage second home ownership in their boundaries may wish to set a lower level of tax.
Collecting the Tax
56. We believe that the collection of tax on second homes and long term empty properties should be made through the existing system used for the collection of Non-Domestic rates. Under this system local authorities already send bills and collect tax due for many properties throughout Scotland, and have an outstanding record of doing so timeously and efficiently. Since local authorities already administer the second homes council tax payment and will have a continuing role with Non-Domestic rates it makes sense that they also collect a second homes tax.
