Business Rates

[Robert Crane]

I rent out a few rooms in my home to guests (not ASTs! but AirBnb type), and have obtained planning for this.

I recently received an email from the VOA asking for floor plans and details of these rooms, so that they can assess me for business rates, which has really frightened me as I have heard nightmare stories about Business Rates. I could not possibly pay those extortionate rates and still make a profit.

Should I respond to the VOA and if so how open do I need to be. I mean if they verify the nature of my SMALL business why bother asking me?

Any comments hugely welcome. Thank you.

 

[kulture]

By getting planning approval you have basically changed your house from residential to a business.

All business properties are valued by the VO and are then taxed. If the valuation is low then you may be eligible for 100% relief.


Your bigger problem is that when you sell your house it will have to be as a business and you will also get capital gains tax.

Airbnb is meant to be renting a room in your house, so not change of use.

You should not have gone for change of use. Talk to planning, see how you can get this reversed. Then reply to the VO

 

[Robert Crane]

Thanks for your response.
The planning sought was for only part of the property being used for guests. And, as I plan on continuing to rent these rooms on Airbnb and Booking.com, on what basis can I reverse the planning consent?
Regarding selling, that is well in the future and I plan on stopping the commercial use of the property at least a year before selling....

 

[WaveJumper]

Kulture was saying in effect you have changed your’ private’ residence to a ’ business’ and I am not sure you are required to do this, did the planning department say that you needed to when you asked for advice?

have a read here
https://www.gov.uk/government/publi...s-in-your-home-a-guide-for-resident-landlords

If you own the property outright, you do not need permission from anyone to let. If you have a mortgage on the property, it is in practice essential to get the mortgage lender’s agreement to let part of the property first: otherwise, you are likely to be in breach of the mortgage terms. If you are a long leaseholder, you should check the terms of the lease to ensure that you can let part of the property and, if necessary, get the freeholder’s agreement first. In either of these situations, if your rights in the property end (eg because the mortgage lender forecloses due to mortgage arrears, or the freeholder terminates the lease because of a breach by the leaseholder), so will the sub-tenant’s.

2.5 Do I need planning permission or other consent from the local council?

If you are intending to make physical alterations to the property, it is advisable to check what is proposed with the local council’s Planning Department. New adaptations must also comply with Building Regulations (for safety of buildings), and again it would be sensible to seek prior approval of plans from the local council’s Building Control Department. Making these checks is especially likely to be important if you are thinking of doing substantial conversion work, such as turning part of the house into a self-contained flat.

You would not need planning permission simply for letting rooms, so long as the property remains primarily your home: but there could be a planning consideration if you were to use it mainly to earn money from letting accommodation.......... it goes on too say more

 

[kulture]

You could have a big problem with your mortgage company. Assuming you have a mortgage. It will have been loaned to you on the provision that the property is residential. Most mortgage companies will not load to a mixed business residential property. You may find that they will demand full repayment. You may find that the value of your house has been considerably reduced. (as it is difficult to get a mortgage the number of potential purchasers has significantly reduced so the value drops).
Talk to planning. It may be easy to get this reversed, it may need a new change of use application.
There is a difference between a B&B business property, where the rooms are converted to B&B and are solely let out as B&B, and AirBnb where they remain "part of your house".

 

[kulture]

I have moved this to the general forum as it does not really belong in the accounts forum.

 

[Robert Crane]

Thank you both for your responses.

I applied for planning 3 years ago as the Planning Enforcement officer advised me to do so. I also hold an HMO licence for the same property. I can tell you now that gaining that planning permission, which is for using only part of the house for guest rooms, took considerable effort and was granted only upon an appeal. I am not sure that trying to revoke this planning is the way forward.

I am more concerned about the VOA and why they have requested information from me now, like floor plans, as this would be readily available from the Council. Can I ask what would be the consequence of not responding to their request? And if I were to respond, how they could verify the information I provide?

I currently pay council tax on the property and I assume that business rates would replace this. I am guessing the latter to be substantially higher than council tax. Other than simply saying that "it is the law", what benefit am I receiving by pay this extra amount in business tax, than I would from paying council tax, ie there are no extra bin collection (or even larger bins!), no extra parking on the road etc.....It sound like an easy way for the government to make money!

 

[Chris Ashdown]

You will most likely have to employ a separate company to empty the rubbish from the business side as even though tiny, businesses are not covered by domestic collections

I would advice calling your planning department and explaining you were miss lead and can it be returned to a private company, the advice will be free and give you the facts you need to change it around

 

[Mr D]

Thank you both for your responses.

I applied for planning 3 years ago as the Planning Enforcement officer advised me to do so. I also hold an HMO licence for the same property. I can tell you now that gaining that planning permission, which is for using only part of the house for guest rooms, took considerable effort and was granted only upon an appeal. I am not sure that trying to revoke this planning is the way forward.

I am more concerned about the VOA and why they have requested information from me now, like floor plans, as this would be readily available from the Council. Can I ask what would be the consequence of not responding to their request? And if I were to respond, how they could verify the information I provide?

I currently pay council tax on the property and I assume that business rates would replace this. I am guessing the latter to be substantially higher than council tax. Other than simply saying that "it is the law", what benefit am I receiving by pay this extra amount in business tax, than I would from paying council tax, ie there are no extra bin collection (or even larger bins!), no extra parking on the road etc.....It sound like an easy way for the government to make money!

You pay towards whatever the tax money is used for. Pretty much like all the other taxes you pay.
All business properties get charged though for many of the smallest / least valuable the business rates are zero or reduced.

Must admit you are the only renter of rooms in your home I have come across with business premises and consequently business rates as an issue.

 

[kulture]

This is clearly more complex than you have at first stated. You really should stop wasting your time complaining about the rights and wrongs of different taxes and start spending proper money and hire a professional (likely a chartered surveyor) who can best look into the details and advise you of the various pitfalls and legal tangles you are stepping into.

An HMO is a very different matter than AirBnB. A HMO is required if you RENT out parts of the house to many different people. Like Student occupation. This is where people from more than one family LIVE there. AirBnB is temporary rent a room in your house. Where people STAY there a few nights or a week or two. There are very different rules and regulations.

From the sound of it you want to run a B&B where you rent out many rooms, indeed most of your rooms and live in a small part of the house. But this is just from reading what you say.

You mention planning enforcement. Details matter. Was this with regard to the HMO and renting to multiple people? Depending on what you said to the planners they may well have assumed you are operating a B&B business and acted accordingly.

You really need professional advice from someone paid to act in YOUR best interests. Depending on the actual circumstances you could be better off having your property use set to B&B.

regarding rates and council tax. this document https://info.ambervalley.gov.uk/docarc/docviewer.aspx?docGuid=3bc17693f4d746808ee3b1f373f71b3c

provides a plain English explanation.

Looking at the document, it would seem that a property is EITHER subject to Council Tax, OR Business Rates, but not both.

But I am not an expert on this, indeed it is likely that no-one on this forum is an expert, this is why it is essential you hire one.

 

[kulture]

The main factor you have not mentioned, but is VITAL you address, is the mortgage and the insurance. You will almost certainly have invalidated any normal domestic insurance, and most likely breached the terms of any residential mortgage.

These two factors could result in you loosing everything.

 

[Robert Crane]

Thank you for your concern.
To answer your questions....
The rooms were formerly let on AST's, hence the HMO (which is still valid!)
I DID use a chartered surveyor when appealing the planning, 3 years ago. I spoke to him again, yesterday, but he said he did not know about business rates. He also said that by merely stopping the act of renting rooms as guest rooms would in effect remove the planning.
Yes, I do want to rent the rooms on an AirBnb type basis as it it far more lucrative (assuming no Business Rates!!) and the landlord escape the ridiculous tenant rights with AST's (It took me 15 months to remove one particular tenant!). BTW, Im in London.
The planning team, long with the HMO team DID view the property 3 years ago, at which time it was part guest rooms part HMO.
I believe that my question about what we receive in return for paying business rates is valid.
I would really appreciate a response to my concerns above about the VOA.
Thank you.

 

[Mr D]

Thank you for your concern.
To answer your questions....
The rooms were formerly let on AST's, hence the HMO (which is still valid!)
I DID use a chartered surveyor when appealing the planning, 3 years ago. I spoke to him again, yesterday, but he said he did not know about business rates. He also said that by merely stopping the act of renting rooms as guest rooms would in effect remove the planning.
Yes, I do want to rent the rooms on an AirBnb type basis as it it far more lucrative (assuming no Business Rates!!) and the landlord escape the ridiculous tenant rights with AST's (It took me 15 months to remove one particular tenant!). BTW, Im in London.
The planning team, long with the HMO team DID view the property 3 years ago, at which time it was part guest rooms part HMO.
I believe that my question about what we receive in return for paying business rates is valid.
I would really appreciate a response to my concerns above about the VOA.
Thank you.

https://www.islington.gov.uk/business/business-rates/what-your-business-rates-pay-for

https://www.ukbusinessforums.co.uk/threads/what-do-you-get-for-paying-council-rates.209967/

Both are answering your question.

 

[kulture]

If you read above you would see the answer

https://info.ambervalley.gov.uk/docarc/docviewer.aspx?docGuid=3bc17693f4d746808ee3b1f373f71b3c

 

[kulture]

You need to get expert advice regarding what is better for you and your property. Is it better for it to be residential with the occasional airbnb and get charged council tax, or is it better to be a B&B and get charged rates. It will change the value of the property, potentially significantly, it may be CHEAPER to be on business rates and potentially get small business rates relief. BUT only an expert can tell you this.

 

[Robert Crane]

You need to get expert advice regarding what is better for you and your property. Is it better for it to be residential with the occasional airbnb and get charged council tax, or is it better to be a B&B and get charged rates. It will change the value of the property, potentially significantly, it may be CHEAPER to be on business rates and potentially get small business rates relief. BUT only an expert can tell you this.

thanks

 

[Robert Crane]

does anyone know of any expert companies on Business rates?

 

[kulture]

I would hope that the chartered surveyor you have used would be an expert. If not, find a real one.

 

[Noah]

I DID use a chartered surveyor when appealing the planning, 3 years ago. I spoke to him again, yesterday, but he said he did not know about business rates.

I think you should treat this in the same way as a surgeon who tells you he doesn't know about X-rays.

 

[rach88]

I feel the need to defend your planner! Planning and business rates consultancy are two very separate areas of expertise. A chartered surveyor who specialises in planning is not going to be able to give advice on business rates. It would be like asking a solicitor who specialises in criminal law to give advice on family law for example.

You can find a rating surveyor by searching https://www.ricsfirms.com/ and filtering by 'rating advice'.

The VOA have a statutory power to compel you to provide information or face a fine of £100 (and further penalties if the information is still not provided). If you are at risk of a fine for non compliance, it should say so on the correspondence you've received. Either way if you ignore them they can come out and inspect the property; again, they have a statutory power to do so.

B&Bs are domestic property and therefore not liable for business rates so long as:

a. it is intended that within the coming year the short stay accommodation will not be provided for more than six persons simultaneously; and

b. the proprietor intends to have his or her sole or main residence within the property and the short stay use will be subsidiary to the use of the property as the proprietor’s sole or main residence.

How many people can you accommodate at one time in your B&B accommodation? Is it more than six? Is more than half the house used for B&B guests?

If you are assessed for business rates then you will still have a council tax assessment as well for the remainder of the property - you will be what is called a composite hereditament or mixed use property. The council tax assessment will be lower than your current one as it will only be for the residual part of the property.

You may well be better off being assessed for business rates so long as you can claim small business rates relief. Assuming this is your only business property, and the rateable value is less than £12,000, you will get full small business rates relief. The rateable value is based on the rental value of the business part of your property at a certain date (currently 1 April 2015). A business rates surveyor can help you estimate this. Or you could wait and see at what level the VOA assess you, and then if necessary seek a surveyor's help to challenge this.

 

[A'ila Home]

While you may get relief from business rates due to a property being under a certain amount this is only if it is the sole business premises you occupy. Also, it’s worth remembering the business rates are just the start, water bills will be calculated partly on the rateable value and they will be coming for you soon and then business premises also need to arrange for commercial waste collection.

 

[Mr D]

You have no knowledge of searching on Google?

I’d say you should Google ‘searching on Google’ but as you have no knowledge of Google that won’t work.

This is indeed a head scratcher.

Was rather baffled by that.
Almost rang my 7 year old niece to ask her how to search on google for google. She can usually explain what I don't understand about computers.