BUSINESS RATES

Information From Matt Bryant At Ocl Accountants

Business rates generally apply to bed and breakfast establishments unless; a) The business does not intend to offer short-stay accommodation to more than six people simultaneously. b) You occupy part of the property as your only or main home, and letting out the rooms is subsidiary to the use of the rest of the house as your home.

• Business rates apply to a self-catering establishment unless you offer short-term lets for fewer than 140 days a year.

• Only the part of the property used for business purposes is subject to business rates.

• Your local authority will calculate the business rates for your property based on its 'rateable value'.

You will need to pay business rates if you are providing serviced or self-catering accommodation, unless you qualify for Small Business Rate Relief, OR for bed and breakfast if:

• You do not intend to offer short stay accommodation to more than six people simultaneously, and;

• You (the owner) occupy part of the property as your only or main home, and;

• Letting out the rooms is subsidiary to the use of the rest of the house as your home (‘subsidiary’ is based on factors such as the length of your season, the scale of modifications undertaken for guests and the proportion of the house you occupy).

• For example, if you only let only two of six bedrooms in your property as a bed and breakfast, business rates are unlikely to apply. However, if you let four of your six bedrooms, you will probably have to pay business rates. Your local authority will be able to advise you.

Note: If you must pay business rates, but use your property for business and domestic purposes, it is only the part you use for business purposes that is subject to business rates.

Council Tax And Valuation Officers

• The domestic accommodation is liable to council tax.

• Where parts of a house have a shared use, such as a kitchen or dining room, the Valuation Officer will visit the property and assess the amount to be paid.

Small Business Rate Relief

• Small Business Rate Relief is available to businesses. For up to date information please visit: https://www. gov.uk/apply-for-business-rate-relief/small-businessrate-relief

Rateable Values

• Currently as of 2020 where the rateable value of the property is less than £15,000, businesses with a rateable value of up to £12,000 receive 100% relief.

• While businesses with a rateable value between £12,000 and £15,000 receive tapered relief.

Extra Small Business Rate Information

If you have a second property, you'll keep getting any existing relief on your main property for 12 months. You can still get Small Business Rate relief on your main property after this if both of the following apply:

• None of your properties have a rateable value above £2,899

• The total rateable value of all your properties is less than £20,000 (£28,000 in London)

Note: If your property has a rateable value of more than £15,000 but less than £51,000 your bill will be calculated using the small business multiplier, which is lower than the standard multiplier.

HOW ARE BUSINESS RATES CALCULATED?

• If you need to pay business rates, your property will have a 'rateable value' based on the rental value of your property.

• These values are set by an independent Government Agency, the Valuation Office Agency (VOA).

Note: Due to the impact of COVID-19, the Government has announced that the planned business rate revaluation will no longer take place in 2021.

WHERE CAN YOU GET DETAILS OF A PROPERTY'S RATEABLE VALUE?

• You can obtain details of the rateable value of your property from your local Valuation Office or the business rates department of your local authority.

• The VOA website allows you to access entries in local rating lists.

Advice On Lodging An Appeal

• You can make an appeal against the 2017 valuation of your property at any time during the life of the valuation (i.e. until April 1, 2022).

• You are advised to appeal as soon as possible as you will have to pay your rates in full until a decision has been reached and, for most appeals, there are limits on how far any resulting change in value will be backdated.

HOW ARE APPEALS MADE?

• Appeals are made in the form of a 'proposal' to the local Valuation Officer or online through the VOA website.

• If an agreement is not reached within three months of receipt of your proposal, it will be automatically referred to the local Valuation Tribunal, which will hear the case and give a decision.

Profit Tips

Every business is different and will have their own targets and profit margins, but it is important to maximise these. Below are some tips to consider:

• Systemise Everything

• Know Your Key Drivers and Monitor Them

• Focus on a few key metrics. Eg. Gross profit margin. Bed Occupancy

• Review Your Prices

• Look at your price points.

• Work your margins.

• Maximise Efficiency, Automate.

• Use systems to monitor effectiveness.

• Justify Costs

• Look at all your costs, Are they necessary?

Extra things to consider:

• Hen parties, dog walking, water sports - who are your audience and what do you think to that?

• Cancellation policies, bedrooms, kitchen equipment etc.

• Look at the other properties and copy their terms.

• Many ask for 30% up front to secure the booking, balance within 60 days.

• Then the damage deposit needs to cover the insurance (payment you pay with any claim). Mine is £500.

Identifying the competition (nearby businesses)

• It is useful to select similar size properties close to yours and also properties close by.

• Consider what size of property is selling.

FINAL things to consider in terms of profit:

• Area

• Revenue

Setup estimate & cash flow forecast (for year 1)

• You need to be realistic about when you will launch which will dictate the first year’s earnings.

• Maybe your place is a summer place and so launching in October will leave a low year 1 revenue.

Summary Of Chapter 1b

This brings Chapter 1B to a close, and we hope you now feel more confident when it comes to the more complex areas in setting up a holiday rental property.

It is definitely worth it in the end though, especially when you see guests enjoying themselves and the great reviews come rolling in, which is why it is good to cover all the ground you can at the very beginning, so you don’t run into issues later on down the line.

Keep a look out for Chapter 2 which will tell you everything you need to know about business plans, legal entity and finance - don’t miss it!

RESEARCH:

WHAT DO PEOPLE LOOK FOR?

Figure out:

• Who your ideal guest is (demographics)

• What your advantages are

• How you differ from your competition

• Which rooms and services got the best and worst feedback

• What your weaknesses are

• What your vision is

Example Simple Plan

A VERY SIMPLE PLAN USED TO SECURE A MORTAGE.

Introduction

I wish to purchase a property in [X location]. My idea is to initially rent out the property as a short-term holiday let

Details of the property:

I plan to pay [£X] for the property. The property is in an excellent location and order. There is no work required on the property and it is currenrtly operating as a short-term holiday rental propoerty.

Existing Revenue Figures:

The figures below are actual figures (using public information):