UK holiday lets: council tax or business rating?

[Wonkeye]

We’ve just joined LMH and are about to begin letting our cottage in a month or so. We thought we’d covered all the issues, but have just been made aware of the issue of whether to opt for rating as a business or continue with council tax. We actually went along to the council, after hearing that one can apply for a 10% reduction in council tax in the case of a second home. In the course of the conversation, we mentioned that we would be doing a certain amoung of letting. The very nice bloke said that rather than the discount for second home ownership, we might fall into the category for business rating. He gave the impression it might depend on how much letting we would be doing and whether we would be advertising or not. He hinted that if we didn’t declare ourselves to be a business, it might well be unfortunate if we were found out! He also imagined it would probably be cheaper than council tax. Googling revealed that this seems to be the case.

We wondered if there’s any choice in the matter and what the pros and cons are. Is there, for example, any downside when one comes to selling the house?

Wonkey

[Christine Kenyon]

Hello Wonkey and good luck with your new holiday cottage. Hope all goes well.

We're based in Cumbria and, as I understand it, you need to be registered for business rates, rather than Council Tax, if your cottage is let or likely to be let for more than 26 weeks each year. You may find that there are advantages in being registered for business rates. In our area, you can claim a 50% discount if you only have one cottage.

You should be receiving your Council Tax info for 2008/09 through the post shortly. Make sure that you need the accompanying blurb. I once read it whilst eating my cornflakes (nothing better to do!) and learnt about marketing grants and the 50% discount on business rates. Normally it would go straight in the recycling, but it was worth reading for once .

[Wonkeye]

Thanks Christine! I've still got the info from the Council so shall doublecheck.

We actually plan to use our cottage both as a second home and as a holiday let. We live permanently in Holland (we're a mixed Dutch/English couple) and plan to visit every couple of months. We won't in any case be exceeding 90 days a year as we're non-residents for tax purposes. However, we intend to keep advertising low-key, simply because we want to preserve the peace and quiet for our neighbours in this end-of-village location. Our aim, if we can achieve it, is to cover our overheads. We do aim, however, to actually let for a minimum of 10 weeks in a tax year and be available for at least 20 weeks, as it will be in any case because of the 90-day tax ruling. We may not make even 10 weeks this year because of our late start and the low-profile approach.
So basically, we wonder whether there's any choice in the business versus Council tax rating where the extent of lets is unknown, and if so, what the pros and cons. are.

Wonkeye

[Christine Kenyon]

I'm not an expert, but if you are planning to let for less than 20 weeks, I don't think you have to register for business rates. We certainly didn't in the early days.

But it is worth checking in your council "blurb" whether there are any benefits to registering for business rates. In our area, business rates for a cottage are comparable to council tax and we have successful applied for a 50% marketing grant. If we only had one cottage we would also be eligible for a 50% discount on our business rates - that would make it worth while!

Your cottage looks beautiful. I can see why you want to spend as much as possible there yourself!

[Wonkeye]

Thanks Christine! Maybe we'll let it simmer for a while and not forget to look at the blurb. Will be interesting if anyone has any dire warnings.

(I seem to have called myself Wonkey instead of Wonkeye further up the page. Haven't used my childhood nickname for years. Slip of the pen.)

[Christine Kenyon]

Ooops - apologies for re-naming you .

[Joanna]

We are border line council tax or business rates and I've resisted going down the business rates route because I'd assumed it would be more expensive and I'd heard that it affects things like rubbish collection - i.e. we might have to pay extra to have our 'business' rubbish collected.

I must contact our council after Easter and get the facts!

[Christine Kenyon]

Hi Joanne. You're right that there are extra costs for rubbish collection if you're a business. We have to buy white bags which cost about £1.00 a time, but this could be more than offset if there is a 50% discount on your business rates for small businesses. It all depends on what your Council is offering. Be interesting to see what you find out.

[Wonkeye]

Hello Joanne,
You said you are border line council tax or business rates. For you, what constituted being border line? A certain number of weeks a year, or the extent you advertised? Was that the 26 weeks a year mentioned by Christine in the case of Cumbria?
Wonkeye

[cromercrabholiday]

We are registered for business rather than domestic, which is cheaper but rubbish collection turned into a nightmare.

First we tried the council, but they never seemed to remember to collect it. They suggested a private firm but they couldn't get down the road (despite using an identical size lorry to the council!). Eventually, we did a deal with our cleaner, who takes it off in her boot to the local dump).

John

[Joanna]

Hi Wonkeye - we are borderline for number of weeks let - when we were buying the cottage and looking at the possibility of letting it out I spoke to someone at the council and they didn't mention advertising as far as I can remember - just the number of weeks. Also, I can't actually remember the numbers now so I think I'd better find out - we could be over it by now.

John - your bad experiences of business collections fill me with dread! We aren't on site and getting rid of the rubbish has been quite a nightmare in the past. Although, I think we're coping with it at the moment.

Guests often miss the collections so we have ended up getting spare bins to hold several weeks worth and often have to take the lot to the dump ourselves when we visit. Problem is that we don't always want to visit that often and if we have to go mid summer for a weekend then we are missing out on a peak week's let.

I also know that we can't count on our current cleaner to take rubbish away for us if it came to that.

[Stephen]

We get 50% discount on our small business rates (council tax)
The council contacted us and told us we were entitled to 50% discount as we were classed as a small business, and I can't complain at that...We don't have any extra to pay for for rubbish/garbage collection, it's collected with all the other households in the area.

[Christine Kenyon]

We've just received our business rates info. As well as the discount that Stephen benefits from, we can also apply for a marketing grant - up to 33% or £500. I'd forgotten about this, but I've used it in the past to get leaflets printed.

[Wonkeye]

Thanks for all the feedback. I guess that if and when we get to the 20-week or so level, we'll consider whether to apply for Business rating or not.
Wonkeye

[CHHL]

Hi

Can anyone advise on this please. I've been reading your posts with interest regarding council tax etc. If I just explain what happened to me...it all started when I enquired with the council as to whether we could get discount as a holiday let! The next thing I know the council have informed the Valuation Office who in turn informed us that we were no longer domestic and classed as a business therefore business rates would apply, have yet to hear what these will be and if, indeed any discount will be applied. The next thing the council are ringing asking if we have planning permission for change of use! No. Didn't even know about it, bit naieve (sorry not sure of spelling) maybe, but with everything else...It's not mentioned in any of the books. Does everyone else have change of use? Wish I hadn't spoken to the council now. I'm booked up for most of July and nearly all August. My husband is at this moment in time speaking nicely to the fortunately, very nice neighbours, but if any of them object... Just waiting for the form to land on the mat