The Valuation Office Agency has issued a reminder that changes to eligibility rules for self-catering properties will come into effect from April 1 – and some owners may be in for a shock.
A leading expert in the field says the increased thresholds will be looked at retrospectively, meaning holiday let owners could face significant unexpected financial impacts.
Currently holiday lets in England only need to be available for commercial letting for 140 days or more over the year to qualify for business rates. From April 1 holiday lets in England must be available for commercial letting for a total of 140 days or more in the current and previous year.
The major change is that the property must have also been actually commercially let for 70 days in the previous 12 months – meaning the thresholds are being applied retrospectively.
Richard Bond, founder of holiday lets firm Finest Retreats, warns:
“Many owners may not be aware that the new thresholds don’t just apply to the 23/24 tax year but that they will actually have had to meet the new thresholds within the 22/23 tax year in order to continue to qualify for Business Rates.
“Not only could this retrospective evaluation take some holiday let owners by surprise but it could also have significant financial impacts on them if they are suddenly switched from Business Rates to Council Tax charges.
“Whilst we welcome tax premiums on empty second homes, which have little benefit to local economies, it seems unfair that holiday let owners are expected to have met the new thresholds in the previous tax year without knowing about the increased requirements.
“Holiday let properties very much operate as small businesses within the UK’s tourism market and, when professionally marketed, can provide six times more income for the local economy**. But, following our own research, we are aware increased taxations could see holiday rental owners exit the market – which would have a detrimental effect on their surrounding local economy.
“Whilst increased thresholds and taxations encourage owners to professionally market properties for holiday lettings, it is important increased requirements do not push small holiday lets out or into financial difficulty, if they’ve had a bad season due to reasons outside of their control.”
He continues: “With the new thresholds retrospectively reviewing booking data, some holiday let owners may be forced out of the market as they face unexpected, significantly higher tax costs. With holiday lets contributing significantly to local economies, this could have knock-on effects to other local businesses in the area, as those tourists who would have eaten in local restaurants, shopped at local stores and visited surrounding attractions are no longer there.”
Finest Retreats claims that fully-managed holiday lets can generate up to six times as much spend per property per year as a second home and up to three times as much as an owner-occupied property, benefitting the local communities.
This article is taken from Letting Agent Today
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