An MSP has called for landlords who let out Edinburgh properties for the festival season to be charged business rates.
The city has seen a boom in recent years in homes being let out as holiday accommodation, fuelled by the growing popularity of online marketplaces such as Airbnb.
Many landlords are exempt from paying business rates under the Scottish Government’s Small Business Bonus Scheme and others fail to declare that their properties operate commercially.
If the rateable value of a property as a business is less than £15,000, the Government provides full relief from any tax under the bonus scheme.
But research published by the Scottish Green Party shows that 83 per cent of short-term lets in Edinburgh declared for non-domestic rates have a rateable value below £15,000 and are therefore not liable for non-domestic rates. This would bring in more than £6 million in tax.
In addition, a property that is let for more than 140 days is liable for business rates rather than council tax but only half such properties are declared – accounting for £4m in taxes.
Scottish Green MSP Andy Wightman, who carried out the research and represents the Lothians, is now leading calls for a review of the system.
He said he has been “inundated” with concerns from his constituents.
“There is no justification for short-term lets being exempted from paying £10.6m in taxes to help meet the considerable costs of public services in Edinburgh,” Mr Wightman said.
“Thanks to this scheme and the failure to declare properties as short-term lets, landlords, many of whom are overseas investors, profit from these services without contributing a penny. It is time to bring short-term lets fully into the planning system and give the council the powers to protect the availability of residential accommodation for the citizens of the city.”
The soaring number of flats being rented out in the capital’s lucrative property market usually peaks in August during the festival.
There were more than 6,200 properties available for short-term letting in Edinburgh, according to recent analysis of online listings.
Short-term or holiday lets are properties which are rented out for a few days or weeks at a time, usually to businesses or tourists. Hotspots in Edinburgh include the Old Town, Marchmont and the Meadows.
Council chiefs are already looking at ways to crack down on the impact of letting sites amid complaints of over-concentration, public safety, waste collection, noise and community cohesion.
The Scottish Government said: “We are aware of the position regarding holiday lets and have published research on the supply and demand for short-term lets.
“The research was commissioned to inform the work of our expert advisory panel on the collaborative economy who are due to report to ministers by the end of the year.”
Ministers have also commissioned the Barclay review into non-domestic rates, which is looking at ways to enhance the system.
Ministers have pledged to “respond swiftly” to its findings when they are published later this month.
Edinburgh is gearing up for the busiest festival season ever. The weak pound and no major rival events have been credited with contributing to a bumper year.