Two Norfolk councils have between them paid out more than £20m in government grants to the owners of holiday lets during the coronavirus outbreak.
But there are fears some of the money could have gone to second home owners who have registered their properties as businesses as a tax dodge.
MORE - Second home owners warned to stay away from village in lockdownSarah Butikofer, leader of North Norfolk District Council (NNDC), said it was an issue she had been concerned about for “quite some time”.
As of April 30, North Norfolk had given out 1,565 £10,000 grants totalling £15.65m to properties classed as self catering holiday units. A further 566 applications are being considered.
Neighbouring West Norfolk Council said it had had paid out 447 grants, or a total of £4.47m, to ‘self catering holiday units’ entitled to small business rate relief, which are not used for personal purposes only.
Some owners claim the coronavirus lockdown has seen bookings worth thousands cancelled.
But the grants are paid out automatically to small businesses which are eligible for rate relief.
To qualify, properties need to be available to let for 210 days of the year and actually let for just 105, meaning owners could use them as second homes for two-thirds of the remainder.
Subscribe to our daily coronavirus newsletter, with all the latest from where you liveA government consultation paper published two years ago, said there were concerns “that owners of properties that are not genuine businesses may reduce their tax liability by declaring that a property is available for let, but making little or no realistic effort to actually let it out”.
Current guidelines say people letting one property with a rateable value of less than £15,000 may be eligible for small business rate relief, meaning they would qualify for the £10,000 payments.
Mrs Butikofer said: “There are people who do this legitimately because they do let their houses out for the required number of days per year.
“But there are others that say they are doing it and don’t let their houses out for the required number of days - they’re playing the system.
“We know that there are agents out there that say if you register your home as a business and claim small business rates rather than council tax, they end up paying no council tax on that property and claiming small business rate relief.
“All you have to do is sign a document saying that’s what you’re going to do and you don’t have to provide any evidence, and the way the legislation stands at the moment we have to accept that.
“North Norfolk and a number of other councils have banded together to ask the government to close that loophole.”
Mrs Butikofer said that while some people were taking unfair advantage of the grants, others were receiving no help because they were ineligible for the scheme.
She said an example were homeowners who rented out one bedroom in their property as a kind of bed and breakfast. But because they did not have to pay business rates, they were not eligible to claim.
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