An “unethical loophole” could mean thousands of second home owners get taxpayer-funded grants during the lockdown.

The financial support for small businesses was announced as an attempt to mitigate the impact of the Covid-19 lockdown on the local economy, with the £1.1bn Welsh Government package allowing firms employing fewer than nine people to apply for £10,000 grants.

But thanks to a “gap” in this financial support package for small businesses, in Gwynedd alone – which contains more holiday homes than any other authority area in Wales – millions of pounds from the public purse could “line the pockets” of second home owners, critics said.

This “loophole” could also affect other authorities with high concentrations of second homes, including Anglesey, Ceredigion and Conwy.

This has led to Gwynedd Council’s leader writing to the Welsh government to highlight what he described as the “unethical way” that second home owners who have already “cynically played the system” could access the public purse “to line their own pockets.”

Gwynedd contains around 5,000 second homes, with the authority estimating that between 1,500 and 1,800 of them have already registered themselves as businesses to avoid a recently introduced 50% premium.

By making the properties available to let through online platforms such as Airbnb for at least 140 days of the year, owners can choose to pay business rates rather than domestic council tax – often resulting in their local authority receiving nothing at all.

“It goes against the whole ethos of the support aid, a package to ensure a viable economy in an uneconomic period due to this disease outbreak that is spreading through the country,” said Cllr Dyfrig Siencyn.

“This grant should assist small rural businesses in Gwynedd that have been directly affected by government laws that prevent companies and businesses from trading.

“That is the reason I have asked Gwynedd council’s legal department to look at a specific clause within the business guidelines, so that it differentiates between a legitimate rural business and second home owners.”

Dwyfor Meirionnydd MP, Liz Saville Roberts, added: "Why should second home owners who’ve flipped to business rates and pay nothing to avoid council tax, get a £10,000 hand-out from this support grant?

“Our communities need leadership, not shocking social injustice.”

Describing initial discussions with the Welsh Government as “positive,” Cllr Siencyn added his belief that civil servants had been “dragging their feet with the details,” however.

Among the measures recommended by Gwynedd Council to close this loophole is a clause stating that any self-catering accommodation would not be eligible for a grant if it had, at any time since April 2010, been a domestic dwelling.

Such properties would, however, be eligible if specific planning permission was in place for such use.

“By adding this clause,” added Cllr Siencyn, “it would omit those who have let their second home for a period to avoid paying Council Tax from receiving the grant, but at the at the same time, ensure that those legitimate businesses that have converted a dwelling into a business, receive it.

“We look forward to receiving the formal response of Welsh Local Government Minister, Julie James today. We hope she will offer a crystal clear guidance to the business support, should any county council face a legal challenge from these wealthy second home owners.”

Arfon AM, Sian Gwenllian, added: "I have campaigned for years for a change to the legislation so as to ensure that owners of second homes can’t avoid paying council taxes.

"That deficient legislation now means that second home owners are able to claim the grant worth £10k. Labour in Wales have a moral obligation to put an end to this at once."

A Welsh government spokesman said in response: “Business support grants are available to self-catering businesses as they fall within one of the sectors most immediately affected by the pandemic and they make an important contribution to our tourism economy.

“However, local authorities have discretion about awarding the grant and can also require business owners to provide additional evidence to support their claim.

“Second homes are liable for council tax and may be subject to additional premiums of up to 100%. The premiums are set by individual local authorities.”