2. What discussions has the Minister had regarding the options available to solve the problem of second home owners avoiding paying tax? OAQ53910

As outlined in our tax policy work plan, officials are working with local authority colleagues to review the use of their discretionary powers to apply council tax premiums and ensure the legislation is operating as intended.

You will be aware that nine Welsh councils have suggested a simple solution to the increasing problem of second homes being exempted from paying any sort of tax whatsoever into the public purse. They argue that the Welsh Government has the powers to adapt section 66 of the Local Government Finance Act 1988 through secondary legislation. Now, fundamentally, we need to remove the current criteria, as set out in section 66, related to self-catering units, and replace it with a principle that every property that is used as a domestic property should remain as a domestic property, whatever its use. Do you agree that we need to amend this legislation, and will your Government proceed immediately to doing so?

I've had exactly this conversation with local authority leaders in our finance sub-group this morning, where we were discussing this specific issue of concerns relating to individuals who decide to change the status of their property to move themselves out of council tax into non-domestic rates, where they could then potentially benefit from our rate relief schemes.

So, as you know, because we've had some discussions on this before and I know that you will be meeting with my officials with Llyr Gruffydd on 4 June to discuss the issue further, a working group of local authority practitioners has been set up to discuss the issue of council tax premiums and discounts and to consider the current position across Wales. There is a further meeting for early June, and I'd be more than happy again to meet with you after that meeting to discuss the findings of that. This is an issue that we are very alive to, and we're very keen to ensure that those who are able to pay council tax and who should be paying council tax certainly do so because, as I've outlined, it's extremely important in being able to support our local authorities to undertake all the work that we require them to do. But, we are absolutely alive to this issue and discussions have been had as recently as this morning.

Minister, it's legitimate to have a second home. However, it's only fair that you make a contribution to the community you're in, especially at times of restricted finances and housing shortage. We also need to ensure that we don't create perverse incentives for people to redesignate domestic dwellings. So, I think it is time to have a comprehensive look at this and just see how we can have a more consistent policy that sends the right messages to people that, if they are privileged enough to have a second home, then that comes with obligations.

I'd just like to reassure David Melding that this is something that we are looking very closely at. Of course, Wales is the only part of the UK that has introduced rules to allow local authorities to charge those premiums on second homes. We're gathering data at the moment to explore to what extent local authorities have charged premiums or applied discounts, which they're also able to do in respect of second homes. Of course, those discretionary powers really were brought in to help local authorities bring underused properties back into use and tackle issues of housing supply. They weren't particularly a revenue-raising power, but, nonetheless, any revenue raised by local authorities is clearly welcome.

HMRC has a clear set of rules to ensure that holiday homes only benefit from its more generous tax treatment when they are genuinely used as businesses, and their rules, which are tried and tested, say that the home has to be available 210 days a year to let and actually let for at least 105 days. Would there be any merit in officials at least considering whether that definition could be usefully imported to reduce the tax avoidance that clearly has been going on in this area?

In Wales, to qualify as self-catering accommodation, a dwelling must be available to be let for at least 140 days in a 12-month period, and it must actually be let for 70 days, and that definition was set out in the Non-Domestic Rating (Definition of Domestic Property) (Wales) Order 2010. I do think that it is timely to review those figures and certainly would look at the work that HMRC is doing in this area as well as a potential model, but all of this is very much in the mix as we have these discussions regarding rate relief particularly relating to second homes, holiday homes and so on.

Well, I'd like to add a third suggestion, not disagreeing with either of the first two. We've got a blanket rate relief scheme is the problem, and I don't believe houses should be part of a blanket rate relief scheme. So, why can't the Welsh Government exclude houses from rate relief and refuse to accept housing except in designated holiday villages as businesses so they would then have to pay the council tax on those buildings? It is something that annoys the vast majority of people in this room today that people are redesignating their second homes as holiday homes and getting away without paying any council tax.

We have been trying to secure evidence that properties have been transferred from the council tax list to non-domestic rating lists and have done so improperly. As yet, we haven't had evidence for that, but we understand certainly anecdotally that it's something that people perceive to be happening, and we have asked local authorities again as recently as this morning to provide us with the evidence. Some commitments were made at that meeting to provide that kind of evidence. In terms of designating holiday villages, that potentially could be adding a level of complexity to the issue, and I think it's something that we'd have to certainly think right through in terms of what that might mean for tourism and any impact it might have on the holiday market.