Many owners are often confused as to whether they should be paying council tax or business rates. The legislative position seems to be that if the property is available to let for more than 140 days in a year then Business Rates should apply.
Luckily, business rates can often work out cheaper than council tax - especially if you qualify for small business rate relief - and you can also apply for a small marketing grant. On the downside, there can be complications with rubbish collection, as you may have to pay for these separately.
Obviously money is key so I would check out the likely Business Rates on your property before talking to the council.
However, getting an idea of what you might pay is problematic. How to calculate the Rateable Value (against which a multiplier - of about 0.45, or 45% - is used to calculate the actual bill) is a bit of a mystery!
As I understand it, the Valuation Office assess an 'open market rental value' eg how much would a businessman want to pay in rent for the property if they were considering taking it on to run as a holiday let business. The Valuation Office therefore look at the likely income the holiday rental will generate less expenses such as marketing costs, furnishing costs and utilities, plus presumably an 'income' for running the business. There is an alternative method used in some areas based on a value per bed space in the property.
Theory is fine but trying to find someone official who can actually explain how a Rateable Value is calculated is another thing entirely! For instance, check out this explanatory description on the Valuation Office website, for use by the assessors. I hope they can make sense of it!
If any one knows how a Rateable Value is actually calculated please post a reply!
The main official information sources are on the Valuation Office website:
http://www.voa.gov.uk/publications/public_fact_sheets/holiday_cottages_guide.html
http://www.voa.gov.uk/publications/public_fact_sheets/self-catering.pdf
There is also a useful post on the Lay My Hat forum - click here.
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There is lots of info on the Valuation office web site.
http://www.2010.voa.gov.uk/rli/static/HelpPages/English/help/help063-how_we_rate_holiday_cottages.html
I gained an estimate of the likley rateable value by putting in a partial postcode on the search page and finding a similar rental property.
http://www.2010.voa.gov.uk/rli/en/basic/find
The rates applicable for Dorset are based on the number of beds. This info from the site:
The value per unit (bed) adopted within this valuation scheme ranges from £390.00 to £670.00 depending upon size, location and other physical factors. The most commonly adopted value per unit within this valuation scheme is £625.00.
Very cool idea! Thanks for posting this.
Really its amazing information about Holiday House Accommodation
Awesome job !!! well done keep it up.
Have just spoke to one of the VOA offices in the South West of England who confirmed that a holiday made available for 140 days or more in a calendar year is legally required to pay business rates and not council tax.
It is summarised here and i have asked them to provide more information to expand the article:
http://www.holidayhomeinformation.co.uk/uk/utilities-and-running-costs/council-tax-and-business-rates-on-a-holiday-let.html
Thanks Andrew
It will be interesting to see whether they change it to match the changed requirement for Furnished Holiday Letting tax scheme where a property now has to be available for 210 days.
can I get small business rate relief on my holiday let?
Yes, you can get up to 50% relief, and in many cases it is cheaper than paying 90% council tax.
Bear in mind business rates face a review over coming years which may put the cost up for you, and there are rumours that owners of holiday lets - i.e. individual dwellings - will be charged for rubbish collection separately, further increasing costs. Nothing has been officially announced yet though.
Andrew
Holiday Home Information
Will the full FHL rules 2011 - 2012 need to be met before a holiday home owner can be exempt from paying cuncil tax and pay business tax instead.
What proof of letting is needed in order to qualify for BT instead of paying Council Tax
what measures are HMRC taking to stop people setting up second homes as Furnished Holiday Lets in order to avoid paying Capital Gains Tax?
To answer anonymous.
FHL and Business Rates are handled separately by HMRC and the Valuation Office Agency respectively. Application for Business Rates is based on availability, not bookings, so proof of availability is required.
Secondly to qualify for FHL relief, an owner would presumably need to show evidence of booking income of a minimum 70 days, 105 days from 2012 onwards. Always best to consult a tax specialist.
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