Lay My Hat

I think I know the answer to this but wanted to check, and I confess am being a bit too lazy to research it this morning.

I currently get 100% rate relief on my cottage. If I buy a second one, would I lose the rate relief on the first, as well as having to pay it on the second?

This could be a really big factor in the decision.

Many thanks

Hi

We have just been through this and "it depends". We were able to keep the 100% rebate on the more expensive property and pay rates on the smaller s long as it is less than £2,900

only use one property, and its rateable value is less than £15,000
use more than one property, and the rateable value of each of your other properties is less than £2,900, with the rateable value of all these properties combined being less than £20,000. 

Thanks Ian,

Your reply suggests it's worth looking at the numbers in a bit more detail.

You have to bear in mind that rateable values change. So you may get the relief one year; but then if the rateable value of your second property increases and sends you over the limit, you lose the lot.

Great point Newtimber

We were exactly at that point during revaluation, then they increased the cut off point. I think we were within £100 of losing out. There is a constant risk of changes in policy on rates and income tax, small changes to both would could make business unviable.

I asked this question a few weeks ago.

The rules seem to be that you lose it for both if the dateable value of the second property is more than £2900. Where we are nothing has such a low value.

We are going to rent the second one out for fewer than the amount of weeks you need to qualify for business rates, and pay Council tax instead. So the 2nd house will only be available for the main Sumer months. What we lose in bookings/income we will gain by not having to pay full business rates on both hpuses

loveka wrote: We are going to rent the second one out for fewer than the amount of weeks you need to qualify for business rates, and pay Council tax instead.

You have to be careful that your second one then ceases to have the tax advantages of a FHL. You then have the difficulty of one property counting as an FHL and the other not; possibly repaying capital allowances. Working out the profits/expenditure separately for each cottage when running it as a single business is going to involve lots more paperwork...

Isn't it going to be simpler and more profitable to make the second one a permanent let?

Yes, I am concerned about the tax but I am hoping an accountant will be able to keep it separate. We will just have to take the hit on capital allowances for the second property, i.e. not claim any. All the capital allowances on the first will have been claimed before the second purchase goes through.

It is a difference of over £5,000 a year though. The whole thing would become pointless if we had to pay that.

loveka wrote: It is a difference of over £5,000 a year though. The whole thing would become pointless if we had to pay that.

You cannot rely on small business rate relief remaining indefinitely and not changing. I think it is highly likely to be removed for individual holiday cottages at some point as there doesn't seem much justification for it.