I’d very much appreciate any tips about what to ask (or not to ask) before going in to the council to ask about changing from council tax to business rates. Forewarned is forearmed:
1) Does anyone know how the VOA arrives at a rateable value? There are no other holiday lets in our village, so I’ve been looking round at places in the area and then looking them up on the VOA website. (http://www.2010.voa.gov.uk/rli/en/basic/find . They state: “For self-catering holiday accommodation we work out the rateable value based on the number of single bed spaces in the property. We set a rateable value on self-catering accommodation by calculating a range of prices per bed space. We then apply a price per space based on the type, size and location of the property.”. However, when researching various properties via their website for comparison, I came across wildly varying bed-rate figures for seemingly similar properties. Examples:
- a) What to me seems a rather poky place with a £ / per-bed rate of £700, approached via a side gangway, but in fact 2 houses back from another property right on the road, with a rate of £525.
- b) Two “adjoining”cottages on a farm, one a former hayloft, the other a converted barn. The former has a £ / per-bed rate of £485, and the latter of £600. Yes, one sleeps more than the other, but then that difference will be given by multiplying the per-bed space and surely should not have an effect on the actual £ / per-bed rate of each.
- c) Two tiny cottages in a row of 4, one still having council tax – Band A, but the other having the very high £ / per-bed business rate of £850. Both cottages virtually identical – including the interior furnishings. From the websites, it’s apparent that one of the two sets of owners has styled the interior of both. Surely council tax A is the lowest one?
Do things like being on a public highway, nice view, etc count? These are just three examples of why I’d like us to get our story right before we embark on the process.
2) When one has been accepted for business rates, does this have any implications for gas, electricity and/or water? Does one then have to apply to these authorities, or better not to enquire?
3) In our single-bed room, our single bed is fitted with an underbed, so two beds can be squeezed into the room. Do you think the assessor would go along with that being one single-bed space?
Would very much appreciate any illuminating comments!!
Wonkeye
Business rates and method of calculation
Business Rates
[1] A basic guide to the rating of holiday cottages and self-catering units (copied from VOA website):
Why does my holiday cottage/self-catering unit have a rateable value?
Any property that is used for commercial purposes may need to be rated for business rates purposes, depending on the exact nature of its usage.
Holiday cottages are assessed for rateable value if they are available for letting for 140 days or more per financial year.
If I let the property for less than 140 days in the year, am I still liable for a rating assessment?
If the property was available for letting throughout the year but the operator makes a conscious decision to only accept bookings for a total of 139 days (or less), then the property will not be subject to a rating assessment but will be allocated a council tax band.
Where the operator does not make a decision to limit the total period for which bookings will be accepted, the property will be liable for a rating assessment, regardless of whether actual lettings fail to exceed the 139-day limit in any given year.
What happens if I decide to let the property on a longterm tenancy?
If you let the property on a long-term basis so that it becomes, for example, someone’s sole, or main residence, then it will no longer be liable for a rating assessment. If it is already assessed for rating purposes, its entry will be deleted from the rating list and it will be ‘banded’ for council tax from the date when it became a domestic property.
What factors will be taken into account in arriving at the rateable value?
In arriving at the rateable value, the actual rents that the operators pay, although rare, may be taken into account. In addition, other factors that may affect the rental value are also considered, including the type, size, location, quality of the accommodation and the income potential.
Is my rateable value the same as the rates I will pay?
No. Rateable values are a key factor in the calculation of business rates but they are not the rates bill. Local authorities are responsible for calculating actual rates bills and for collecting rates and will use the rateable value in working out how much you have to pay. The local authority will apply a factor called the multiplier, to the rateable value and then deduct any reliefs that are available. In England Communities and Local Government set the multiplier and in Wales the Welsh Assembly Government sets the multiplier.
Why do you need to know how much income the property is generating?
When we [VOA] assess the rateable value of properties such as shops, offices or industrial premises, there is plenty of rental evidence available for us [VOA] to make comparisons. With self-catering property we [VOA] will still carry out assessments in this way if possible. In practice, however, there are very few locations where sufficient reliable rental evidence is available to provide a sound basis of valuation and other methods have to be used. Gross receipts have to be taken into consideration in this case as a guide to the potential the property has to generate income. This in turn provides a sound basis to determine how much an operator would pay in rent for the property.
This method, which we [VOA] refer to as the ‘receipts and expenditure’ method of valuation is also used on properties such as pubs, restaurants and other licensed premises.
From what date will the rateable value be effective?
Generally, a property will be entered in the rating list with effect from the date that it becomes available for use as a self-catering unit. This date is known as the ‘Effective Date’.
How do you gather this information?
We [VOA] use forms called ‘Requests for information’. One of them - VO6048 has been designed especially for self-catering units and holiday cottages. The form asks a variety of questions about the way an operator manages the letting of the property in question. The answers to these questions ensure that we [VOA] take into account differences in tariffs, marketing, levels of service, or quality of furnishings and provision of other non-rateable items when assessing rateable value.
Our aim is to determine:
• the potential receipts from the property, if let as a business for self-catering by a reasonably competent proprietor;
• the expenses that are reasonably likely to be incurred in achieving those lettings. For rating purposes we [VOA] must assume the proprietor does not own the property but rents it from a landlord, since the object is to assess the property’s rental value; and
• the balance between receipts and expenses. We [VOA] consider the return the proprietor would expect for running the business and the amount available to pay rent for the property.
--------------------------------------------------------------------
[2] If you do meet the criteria, go to the Federation of Self Catering Associations' website to download the form VO 6048 - go to http://is.gd/6NqgG -, then complete and return the form to your local VOA office.
[3] In calculating bed spaces, double and twin rooms will count as TWO 'Single Bed Spaces' and a single room as one. A bunk bed occupying a single size room will count as one space. A bunk squeezed into a double room to form a 'family' room should be ignored, as should 'putyou- ups'. With regard to flats, where there is adequate space in the living area to have a ‘bed-settee’ this should be included as a single bed space.
[4] Paying business rates will be less costly than paying Council Tax; particularly if you qualify for small business rate relief schemes available in England and Wales.
[5] There are no implications for gas, electricity and/or water; these authorities do not need advising.
[6] Ignore the 'underbed', that does not count as a bed space.
Graham Tayler - Chairman, WASCO
--------------------------------------------------------------------
Wales Association of Self Catering Operators | www.wasco.org.uk
Gymdelthas Gwlethredwyr Hunan-Ddarpar Cymru
--------------------------------------------------------------------
[E]: chairman@wasco.org.uk
Why does my holiday cottage/self-catering unit have a rateable value?
Any property that is used for commercial purposes may need to be rated for business rates purposes, depending on the exact nature of its usage.
Holiday cottages are assessed for rateable value if they are available for letting for 140 days or more per financial year.
If I let the property for less than 140 days in the year, am I still liable for a rating assessment?
If the property was available for letting throughout the year but the operator makes a conscious decision to only accept bookings for a total of 139 days (or less), then the property will not be subject to a rating assessment but will be allocated a council tax band.
Where the operator does not make a decision to limit the total period for which bookings will be accepted, the property will be liable for a rating assessment, regardless of whether actual lettings fail to exceed the 139-day limit in any given year.
What happens if I decide to let the property on a longterm tenancy?
If you let the property on a long-term basis so that it becomes, for example, someone’s sole, or main residence, then it will no longer be liable for a rating assessment. If it is already assessed for rating purposes, its entry will be deleted from the rating list and it will be ‘banded’ for council tax from the date when it became a domestic property.
What factors will be taken into account in arriving at the rateable value?
In arriving at the rateable value, the actual rents that the operators pay, although rare, may be taken into account. In addition, other factors that may affect the rental value are also considered, including the type, size, location, quality of the accommodation and the income potential.
Is my rateable value the same as the rates I will pay?
No. Rateable values are a key factor in the calculation of business rates but they are not the rates bill. Local authorities are responsible for calculating actual rates bills and for collecting rates and will use the rateable value in working out how much you have to pay. The local authority will apply a factor called the multiplier, to the rateable value and then deduct any reliefs that are available. In England Communities and Local Government set the multiplier and in Wales the Welsh Assembly Government sets the multiplier.
Why do you need to know how much income the property is generating?
When we [VOA] assess the rateable value of properties such as shops, offices or industrial premises, there is plenty of rental evidence available for us [VOA] to make comparisons. With self-catering property we [VOA] will still carry out assessments in this way if possible. In practice, however, there are very few locations where sufficient reliable rental evidence is available to provide a sound basis of valuation and other methods have to be used. Gross receipts have to be taken into consideration in this case as a guide to the potential the property has to generate income. This in turn provides a sound basis to determine how much an operator would pay in rent for the property.
This method, which we [VOA] refer to as the ‘receipts and expenditure’ method of valuation is also used on properties such as pubs, restaurants and other licensed premises.
From what date will the rateable value be effective?
Generally, a property will be entered in the rating list with effect from the date that it becomes available for use as a self-catering unit. This date is known as the ‘Effective Date’.
How do you gather this information?
We [VOA] use forms called ‘Requests for information’. One of them - VO6048 has been designed especially for self-catering units and holiday cottages. The form asks a variety of questions about the way an operator manages the letting of the property in question. The answers to these questions ensure that we [VOA] take into account differences in tariffs, marketing, levels of service, or quality of furnishings and provision of other non-rateable items when assessing rateable value.
Our aim is to determine:
• the potential receipts from the property, if let as a business for self-catering by a reasonably competent proprietor;
• the expenses that are reasonably likely to be incurred in achieving those lettings. For rating purposes we [VOA] must assume the proprietor does not own the property but rents it from a landlord, since the object is to assess the property’s rental value; and
• the balance between receipts and expenses. We [VOA] consider the return the proprietor would expect for running the business and the amount available to pay rent for the property.
--------------------------------------------------------------------
[2] If you do meet the criteria, go to the Federation of Self Catering Associations' website to download the form VO 6048 - go to http://is.gd/6NqgG -, then complete and return the form to your local VOA office.
[3] In calculating bed spaces, double and twin rooms will count as TWO 'Single Bed Spaces' and a single room as one. A bunk bed occupying a single size room will count as one space. A bunk squeezed into a double room to form a 'family' room should be ignored, as should 'putyou- ups'. With regard to flats, where there is adequate space in the living area to have a ‘bed-settee’ this should be included as a single bed space.
[4] Paying business rates will be less costly than paying Council Tax; particularly if you qualify for small business rate relief schemes available in England and Wales.
[5] There are no implications for gas, electricity and/or water; these authorities do not need advising.
[6] Ignore the 'underbed', that does not count as a bed space.
Graham Tayler - Chairman, WASCO
--------------------------------------------------------------------
Wales Association of Self Catering Operators | www.wasco.org.uk
Gymdelthas Gwlethredwyr Hunan-Ddarpar Cymru
--------------------------------------------------------------------
[E]: chairman@wasco.org.uk
Last edited by WASCO on Sat Feb 20, 2010 11:21 am, edited 1 time in total.
Business rates and method of calculation
Thanks Graham! I still remain curious about the seeming discrepancies I uncovered in my sleuthing (snooping?). Maybe it's not for nothing that I chose as Avatar a picture of me wearing a mining lamp - to light up dark areas!