Posted on 08/06/2022 by David
For the financial year 2022-23 onwards the rules in Wales concerning non-domestic rates (business rates) for holiday lets are changing.
If you rent out your holiday cottage for a minimum of 182 days a year and it is available to let for 252 days a year (including any days actually let) you can apply to pay non-domestic rates instead of council tax. This puts you on an equal footing with other businesses such as hotels and B&Bs. In Wales there is currently an additional advantage in that small business relief means that you will not pay any business rates on the first £6000 rateable value, roughly equivalent to a property sleeping 12 people depending on its location. This could provide you with a significant savings as properties not achieving these levels will be classed as second homes and be charged increased countil tax rates. The Welsh Government will permit councils to increase council tax by up to 300% for second homes but the actual amount will be determined by each council. For example, for the 2023-24 tax year, Conwy Council has announced it will apply a 50% increase.
To make the change to business rates you need to contact the Valuation Office Agency (VOA). The process is a fairly simple one but does require some form filling.
How to apply?
You can request an application form by either calling the valuations office on 03000 505 505 or by emailing them at ratingwales@voa.gsi.gov.uk
You can only apply for business rates when you have met the qualifying criteria, future bookings do not count. Let them know you have met the criteria, the property’s address and the address you would like the form sent to. Please note that you have 56 days to return the form or you may be fined £100.
What information do they ask for in the form?
Apart from the property address and your contact details they will ask for the following:
- The date you started letting commercially.
- The date your first booking started.
- The date you achieved 182 days of occupancy and the date you achieved the 238 days of availability (this means days booked by paying customers and days when the property is empty but not days blocked off for your own use or maintenance, i.e. when the property was not available for a paying guest to use it).
- You will also be asked for some basic financial information such as expenses and income for the property.
Questions will refer to the last 3 years, if you have been letting for less than this time provide information since you started letting.
How do they calculate the rate?
After submitting your form you will be sent a letter telling you the rateable value of your property. Self-catering properties are assessed on the basis of bed spaces. Using historical data collected by the Valuation Office it allocates a standard value for each bed space according to the geographical area the property is located in.
The rateable value is not the amount you will pay, it is used as part of the calculation.
I have my letter from the Valuation office what next?
Once you have your rateable value you can it is a good idea to check and compare it with others self-catering properties in your area. This can be done online at www.gov.uk/correct-your-business-rates by entering your postcode. (It can be easier to search for comparable properties on the site by using a partial postcode as it encompasses a larger geographical area).
This website is very helpful and should be your first call for up to date information on Business rates.
When you check your valuation the important thing is that the number of bed spaces your property has been registered as having is correct. (This may come under a column headed square meters, but it should in fact be the number of bed-spaces in the property.)
NB: Bunk beds count as only one bed space!
If you think the VOA has made a mistake you have a time limit in which to request that information is amended or corrected. You can do this online, by calling the phone number on the letter or by writing to the address on the letter. If you feel the valuation is still wrong you do have the chance to appeal against it.
Remember this is the valuation, not the amount you will be asked to pay. Please check the VOA website for more details. www.gov.uk/correct-your-business-rates
How much will I pay?
Payment is collected by the local council, not the Valuation Office. An invoice will be sent from the local council with a calculation showing the rateable value, multiplier and relief. The multiplier is set each year by government policy.
Other things to consider
As a business you will have to arrange for a trade waste collection service. This will need to be from a licenced trade waste carrier and the charge will be in the hundreds of pounds per year depending on which company you use and the services provided. In any case, this should be substantially less than the council tax rate and many cottage owners find the trade waste services are a better service as they can be tailored to suit (e.g. weekly collections instead of every 4 weeks by the council).