Beach chalet to FHL start-up advice - Please

[petethemeat]

Hi to all ,
I'd very much appreciate advice on my plans to start letting my beach chalet . I'm mainly interested in making this property more financially efficient and covering my costs rather than turn it into a money making machine . The property currently falls into the second home category and I pay council tax and an annual land rent for the plot it stands on . Depending on the advice I receive I intend to inform the VA office I now intend it to be a furnished holiday let .
Can anyone advise and give greater detail on :-
How to propose the change to the VA office and the general process ?
I fully expect to meet all the availability and days actually let criteria but I only wish to meet the minimums required . I intend to do this off season at attractive but commercial rents as much as possible . I was thinking £100 a week (you can rent 3 bed residental properties for this amount nearby)Would this be acceptable to HMRC ?
The property is very small 7M x 5M and quite unique - how do they go about working out a business rate for it ?
How key is the sleeping space to this decision - currently I have 2 small bunks in the 1 bedroom and 2 double sofabeds in the main living area . Would it be beneficial to replace sofa beds with regular sofas ?
I'd appreciate advice on what typical capital expenses might be involved and when such improvements , repairs or purchases should be carried out to be most financially beneficial to me - i.e. before or during the letting period ?
I think I read profits below £2500 don't need to be included on my self assessment return (completed at present by my accountant) and a phone call to HMRC would suffice ? Any advice on this greatly appreciated . Finally I'm hoping someone would be able to illustrate a simple costs/profits/tax scenario that a small-time-charlie like myself might encounter .
As stated - I'm an utter newbie which brought me to this excellent website , I'd love to receive some quality advice on the questions posed and ANY relevant tips and guidance you feel would help me .
Thanks in advance - petethemeat

[zebedee]

Hello and welcome.
Hate to upset you, but all information and any profits "(and losses) you make have to be declared on your self assessment tax form as it is considered unearned income.

For £100 a week, who will clean the chalet between your guests? Cleaning and presentation of bed linen to the point of OCD is the most important thing for your guests and it doesn't come cheap.

You may think others sell at £100, but what sort of guests will you attract if you pitch your price this low? Will they respect your property as you would want them to?

You have asked a lot of questions, and others will come back with answers, but just giving you a few things to think about for starters.
Good luck, and do use the search facility on this forum. You will find a lot of answers to your questions explained in more detail

[petethemeat]

Hi , thanks for the amazingly quick reply !
You haven't upset me one bit re the tax return - you've provided the info I requested and I'm grateful - a little more work for my accountant is all it means . I appreciate your concern about my rent pricing suggestion and potential costs and customers , thankfully this is not a concern for me as I already have the customers lined up . They will be repeat (annually but for less than 30 days each time as per the criteria) customers who are as happy with the chalet and pricing as I am with them . I'm more concerned that my modest targets would in some way be provocative to HMRC ?

Thanks again - petethemeat

[zebedee]

Sorry, are you planned my a holiday let or have some other customers in mind?

[Nemo]

What you price it at is your concern and I can't see that HMRC will be too bothered as long as you declare all legitimate income and expenditure. If you make a loss continuously I guess that might be questioned by HMRC, but clearly that's not your intention.

I do wonder how you think you can cover your costs and wear and tear on the property from these guests who are only paying £100 a week? Currently you can sleep six it appears albeit there's only one bedroom big enough for bunks? Have you thought about the cost of furniture and appliance replacement when things go wrong? Paying guests have high expectations nowadays but generally I think many of us here would concur that the less people pay, the less they respect your property.

Out of season lets obviously use more electricity for heating too so that needs factoring in. Guests don't worry about leaving lights on or heaters all the time when they're not paying the bills.

Valuations for business rates are carried out by the Valuation Office. There's plenty to read online here: https://www.gov.uk/government/organisat ... ice-agency

If you have no other business rated property, you qualify for rate relief which is currently 100%, although these things can change in the future. Once on business rates you get no refuse collection so that would have to be arranged separately unless you're on a park and already have some arrangement in place?

[Fleur]

We are looking at renting a N.T.Bunk house =bunk beds, simple accommodation and sleeps 16. No bedding or towels supplied. £150 per night Mon to Thu, £200 per night Fri to Sun. Interesting property in beautiful area.

I think your price is definitely too cheap. Perhaps it's this low because you plan to let just to friends and people you know. However they still use all facilities and it will involve wear and tear and changeover management.

BTW Welcome! Good luck with your new venture and do continue to ask questions.

[petethemeat]

Hi Fleur and Nemo , thank you for your responses - I totally understand your guidance on the pricing and wear and tear potential but I know this won't be an issue . I can't say I haven't been warned if I'm wrong ! LOL
I did ask for ANY tips and guidance and I'm genuinely grateful that people like yourselves take time to provide them but I'd really really appreciate anyone who could answer the remaining unanswered specific questions in my original post as this will help me at the very earliest stage of this venture .
Thanks in advance for any further help provided by anyone .

[zebedee]

Petethemeat said:

I appreciate your concern about my rent pricing suggestion and potential costs and customers , thankfully this is not a concern for me as I already have the customers lined up . They will be repeat (annually but for less than 30 days each time as per the criteria) customers who are as happy with the chalet and pricing as I am with them

So, this really puzzles me, .....

Just who are the repeat guests that you have lined up that will:
- pay £100 per week out of season,
- who will not cause any wear and tear, and
- will provide you with enough bookings to meet the criteria
- With enough bookings in a year for you to cover your costs.
- who appear to be personally known to you
- Who will presumably return year after year, as you don't seem to factor in any advertising costs??

Not being nosy, just curious, as you seem to have the number of regulars that most of us could only dream of and who have been doing this for years.

[petethemeat]

Hi zebedee ,

Can you actually help any further with my original enquiry ?

Can't you accept what I've told you just because it doesn't fit with your experience ?

Do you think it sensible for me to publicly name my customers just to sate your "curiosity" ?

I don't wish to sound ungrateful but I posted to try to obtain information not carry out another business plan or publish a customer database.

Cheers

[rosebud]

I contacted the local council - not the the VA office - re use as a holiday let . They have a minimum number of weeks you have to advertise for - but I can't remember the figures.

I am aware of having read that one has to let at a commercial rate for acceptance by HMRC - this has made me hesitate to offer big reductions to friends. You need to compare yourself with other local holiday lets rather than long term lets.

Re beds - it depends on who you want to stay. I was advised not to have bunk beds in my second bedroom. I had a sofa bed in the living room for 4 years but eventually got a regular sofa bed as 1) It wasn't that comfortable to sit on 2) Occasionally guests had their friends / family using it without my permission.

My costs -without repairs or maintenance or new furniture / white goods -add up to more than £6000 a year..

You can claim on repairs and purchases before or during the letting period.

[Nemo]

Can you actually help any further with my original enquiry ?

Which bit hasn't been answered? I wouldn't publish my costs on a public forum anyway. Rosebud very kindly has. No disrespect but you want every question answered to your satisfaction and members not asking questions you don't wish to answer. Many of us here, just read and read past threads to try and glean what we needed rather than expecting to be spoon fed exactly what we needed to know as soon as we arrived at this forum.

[Giraffe]

I have just been through the process of applying for business rates. The first step is to contact the VA who will send you a form to fill in. To qualify as a businessholiday let you must make your place available to let for 140 days per year ( note this is a different time than that used by HMRC for qualifying each year as a holiday let business). The VA will also need confirmation that you are running it as a proper business - eg they want to know how and where you advertise to get your customers. If VA give approval for business rates they then contact the relevant Local Authority to change you from council tax to business rates. You can then claim your small business discount. This whole process took me less than one month.

NOTE: to qualify each year as a holiday let with HMRC you will need to have the minimum number of weeks (15) let on a COMMERCIAL basis. Letting to family/friends/colleagues or others at a discount does not qualify towards the annual count. Also, if you ever wish to sell your holiday let as a business, HMRC will need evidence that you have run it on commercial terms with a view to making a profit each year. Otherwise you will pay capital gains when selling.

I agree with Nemo. There is a huge amount of information that will be useful to you on this forum. I trawled every past entry before I joined last year and ventured to participate.

[petethemeat]

Hi again Nemo ,
Please forgive me any perceived lack of forum etiquette . I did state I was an utter newbie to the site (and forums of any description) and that I intended to progress my FHL venture depending on the advice I received through this forum . I'm maybe overly keen to get this idea moving ASAP as I did indeed choose to post the specific questions I sought answers for straight from the off . This seemed the most sensible option rather than trawl though the mountains of information that's been kindly posted , looking for snippits here and there and trying to adapt them to my personal situation . So .. yes I suppose I hoped (NOT expected) to be spoon fed the info ASAP . Apologies for not realising that's not how it works ,
I feel suitably chastised but in my defence I'd do exactly the same for others in future . Although I only wish to cover my costs with this venture there's an old saying that I think many contributers to this site will be very familiar with -
Time is money .

I'm baffled by your question "Which bit hasn't been answered?" Until Giraffes and rosebuds recent additions to the thread (thank you folks , just the type of info I was hoping for) very few of my O.P questions had been answered at all !
Also I have never asked anyone to publish their costs , just like I would never ask anyone intrusive questions regarding their personal business , especially having already stated those very questions aren't relevant in a very polite manner.

Cheers

[petethemeat]

Hi Giraffe ,
Thank you for the reply . You made some interesting points that I'm hoping you might clarify as best you understand them ?
As in my reply to Nemo -apologies for asking specific questions before trawling through the forum .

As my chalet is so small and unique I'm struggling to think of any other comparable FHL's . l feel letting in winter for £100 a week IS commercial , if I make the small profit I aim for how can it not be ? Some posters assume heating etc in winter will be an issue but my electricity is via a coin meter so I still feel the £100 I originally stated is viable.

You mention letting to friends , family and others at a discount does not qualify towards to weeks let criteria - would letting to friends etc at commercial rents count ?

My understanding was the chalet must be genuinely available for letting for over 200 days a year am I right in thinking once I obtain all the bookings I require to meet the 15 week criteria I don't have to take any more . I.e. I could turn down bookings in preferance for ones in more acceptable (to me) months ?
Edit - I now realise the difference you mention between the VA office and HMRC's letting period criteria . Thanks !

Cheers - petethemeat

[petethemeat]

Hi rosebud ,

Your advice much appreciated . Your info re the sofa beds was very interesting . I was wondering how much influence the amount of sleeping accommodation provided would have on my rateable value assessment ? This is obviously key to my business plan of covering my costs through commercial letting . In my situation I have options to reconfigure the layout to provide different accommodation . There is only one small bedroom that currently houses two small bunks and an additional two sofa beds in the main room , I only envisage one or possibly two people staying at most times so I could replace the bunks with a proper bed and replace the sofabeds with regular sofas if this would prove more beneficial to favourable assessment ?

Thanks again - petethemeat