The government has published its response to the 2018 consultation ‘Business rates treatment of self-catering accommodation’ which considered options to strengthen the criteria for holiday lets to be liable for Business Rates.
The original consultation ran from November 2018 to January 2019. The current position with Holiday lets is that:
- Owners of second homes are usually liable for Council Tax, including where they carry out a degree of short-term letting.
- Where a property is available for letting commercially as self-catering accommodation for short periods totalling 140 days or more in the coming year, it will generally be valued for Business Rates instead of Council Tax.
- Properties subject to Business Rates can benefit from 100% relief where they have a rateable value below the Small Business Rate Relief (SBRR) threshold of £12,000.
- This applies to many holiday lets.
Concerns have been raised that property owners declare that a property is available to let, to benefit from SBRR, but make little or no effort to actually let it out.
A total of 106 responses to the consultation were received.
- The overwhelming majority of respondents agreed that the current criteria for Business Rates should be strengthened.
- A majority supported aligning the criteria in England with those in Wales.
- This would mean the addition of a 140-day availability and 70-day letting condition applying to the previous year.
- Around half of respondents supported strengthening the criteria further, beyond those in Wales.
The government has decided to introduce criteria similar to those introduced in Wales in 2010.
Under the new rules in England, for a Let property to be subject to Business Rates rather than Council Tax, its owner must evidence that the property:
- Will be available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days in the following year.
- Was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days in the previous year.
- Was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days in the previous year.
Evidence to support meeting the conditions might include the website or brochure used to advertise, letting details and accounts.
The exact method for collecting evidence will be communicated before the measures come into force.
- This change will be legislated in early 2022, taking effect from 1 April 2023. This will take into account marketing and letting activity from 1 April 2022.
- To prevent backdated Council Tax bills, holiday let owners that will not meet the new Business Rates criteria should notify the Valuation Office Agency as soon as possible to assess the property as domestic and obtain a Council Tax valuation.
The Scottish government will introduce a similar 70-day letting condition for holiday lets to be assessed for Business Rates. This will apply from 1 April 2022.
Useful guides on this topic
Furnished Holiday Letting
What is Furnished Holiday Letting? How do you qualify for Furnished Holiday Letting? What are the rules for Furnished Holiday Letting?
Property profits & losses: Toolkit (2021-22)
Our Property profits & losses toolkit takes HMRC's version and adds a great deal more information about what you can claim as an individual.
Buy-to-let ownership: personal v. company?
What is the most tax-efficient option to own buy-to-let property? Personally or via a company? What are the income and Corporation Tax, CGT, IHT, ATED, SDLT, or VAT issues? With tips on profit extraction and other planning points, case studies and links to further guidance.
Business Rates Review: Final Report
HMRC have published their final report on the March 2020 'Business Rates Review Call for Evidence' which launched a fundamental review of business rates, aiming to reduce the burden on business and improve the business rates system.