IT is not known for being a thorn in the side of the public sector, but the usually sedate world of caravanning is about to cause the Scottish economy one enormous headache.

Thanks to a little-known tax loophole, the caravanning community is set to cost Scotland's cash-strapped councils millions of pounds a year in revenue.

The loophole is simple: each caravan in a caravan park can apply for rates relief, which in turn cuts the overall bill for the park considerably. Few knew about the law until the owners of caravans in the Rosneath Castle Caravan Park, near Helensburgh, first began using it. The 300 caravan owners at the park have now bombarded the Clydebank business ratings assessors' office with letters and phone calls, each seeking to save a few hundred pounds per year in council rates.

One assessor called the activity the "bane of my life" and said that the finance department in Campbeltown needed a dedicated person to cope during a two-month peak period just before the summer.

The applicants were acting on letters that they had received from David Quibell, who runs Rosneath, after he apparently uncovered the ratings loophole.

Quibell had discovered that if the owners applied to have their caravans separately rated, their ratings would be deducted from the park's overall valuation. And because each caravan would only be valued at a few hundred pounds, they would be exempt from paying rates under the Scottish Government's small business rates relief scheme. This applied to them despite the fact that they were not small businesses and were not even allowed to let their caravans under the Rosneath regulations.

The move by the Rosneath caravanners has angered local retailers who do not qualify for rates relief. It has already reduced the caravan site's rateable value by about £80,000 to £60,000.

Tax differences between Scottish and English parks became a hot topic of conversation at trade body, the National Caravan Council.

Now assessors are concerned that every caravanner in the land will apply for rate relief and cripple council coffers at a time when they are already enduring severe government cutbacks.

Douglas Boutell, an assessor at the Clydebank office of the Dunbartonshire and Argyll and Bute Joint Valuation Board, said: "I have been in this office for 33 years and I can probably count on one hand the number of caravans that have requested this in the past. But at the end of the financial year we started getting phone calls and letters from folk wanting their caravans separately rated.

"I am still getting emails and letters in every day. I'm not sure the small business rates relief scheme was set up to alleviate holiday owners from their liabilities. It's totally legal but is it ethical? Nobody is going to tell me that a holiday caravan is a small business.

"If this was to go viral in Ayrshire, where there's maybe 1000 caravans, it could have a serious impact on the public finances."

David Gale-Hasleham of Chester-based surveyor Charles F Jones & Son, who advises the National Caravan Council, said that the loophole had been outlawed more than 20 years ago in England and Wales but not in Scotland. Caravans formerly had separate ratings before laws in the mid-1970s put the primary responsibility with park owners.

He said: "If there was a move by a lot of caravan owners in Scotland to try and resurrect their ratings, the rules might well be changed."

Dave McAdam, a retired retailer from Stepps who owns a caravan at Rosneath, joked that it was good that the assessor had found the spate of applications overwhelming.

He said: "I didn't realise that the park was unique in this respect. I thought it was a general thing open to anybody that owned a residential caravan in Scotland."

He said that he and his wife, Maureen, had owned a caravan at Rosneath since 1996 and in many ways preferred it to their apartment in Portugal. We love the park. The amenities are good and there's a good kids' club. It's a nice quiet site. We're very happy with the new arrangement."

David Quibell did not return calls in time for publication.