The Number One item on PASC’s agenda is to seek a fairer system by which the Valuation Office apply Rateable Values (RV’s) to self-catering businesses. The current basis is simply too high.
In January 2019 we achieved a huge breakthrough and the Valuation Office agreed to reduce self-catering business rates for complexes of five units and above, by up to a third in most cases. Units of three and four will also see a reduction, although slightly tapered. PASC can provide Members with guides on how to achieve these reductions. As always with the Valuation Office there are complications with almost every Valuation, so definitely worth contacting PASC first.
PASC encourages you to visit the Government's VO website (link here) where you will see the menu on the right - we would draw your attention to the full revised Practice Note at the bottom of the menu, which you can click on for more details - but the main points can be summarised as:
When deciding on the appropriate percentage to adopt, the following approach should be taken. In order to define the quality a judgement must be made based on the physical attributes of the property in accord with the definitions below:
Category A High quality modern or modernised units significantly above average attractiveness/value for the type/location. The units will usually be detached, have high quality facilities significantly above standard accommodation - key indicators include - swimming pools, tennis courts, games room, sauna, hot tubs and animal petting. A comparatively high level of investment in maintaining and presenting the property will be required to achieve maximum tariffs.
Category B The default category should described as ‘standard’. These properties will have the typical range of facilities for a self-catering property, without the distinguishing features of Category A. They will usually have central heating and double glazing and a reasonable quality kitchen and bathroom.
Category C These are basic properties below ‘standard’ quality. There will be a low level of investment in maintaining and presenting the property. Room sizes will typically be smaller, sometimes with shared facilities. There will be a lack of all standard facilities such as heating, double glazing and an absence of any modernisation. Very few properties will meet the criteria of this category.
New Percentages to be Applied
Typical percentage to be applied to each category derived from accounts analysis
Whilst this a breakthrough for many self-catering businesses it is fundamentally flawed. For example, a large single unit sleeping 24 takes more effort to changeover than 5 times sleeps 2. The latter would get the benefit of the lower rating system, whilst the larger one would not. The taper relief on units of three and four is also an unnecessary complication. The Valuation Office have been forced to make this change in recognition of the INPUT from owners so it should apply to all that are run as real businesses..
We will continue to lobby hard for a more common-sense approach to the Valuation System to cover off these issues. However it would be inappropriate not the thank the self-catering team at the Valuation Office for the professional manner under which all the negotiations and lobbying have taken place.
PASC is in regular meetings and communications with the Valuation Office on this subject and cooperates with other parties sharing the same concerns, principally the Tourism Alliance, the FSB and the South West Tourism Alliance. PASC has the contacts to lobby Government directly and the Executive Chair of PASC, Alistair Handyside, was responsible for the Self-Catering study into the impact of business rates on the sector that did so much to help get some mitigation from the Government at the Spring Budget. You can download or buy a copy of the study in the Reports section.
The 2017 Business Rates revaluation saw some of the biggest rises in Business Rates being levied against the self-catering sector. PASC was particularly concerned with the rises for larger properties, as these will not benefit from the Governments initiative that small businesses with a RV’s of under £12,000 will not actually pay Business Rates. Average rises for the larger properties are huge.
The 2017 Business Rates revaluation has seen some of the biggest rises in Business Rates being levied against the self-catering sector. PASC is particularly concerned with the rises for larger properties, as these will not benefit from the Governments initiative that small businesses with a RV’s of under £12,000 will not actually pay Business Rates. Average rises for the larger properties are huge.
These rises came into effect from April 2017 with businesses paying these increases immediately thereafter. The rows marked in red show how the larger businesses are bearing the brunt. In the Spring Budget the Chancellor did announce some mitigation, however this is for ONE YEAR ONLY.
These are small businesses that PASC is referring to here. A self-catering business with four holiday cottages, with each sleeping six persons, falls into the 21-50 band above and had an average increase of 58% levied against them. Their turnover is probably in the region of £80,000 -£130,000 dependent upon the location and quality. A self-catering business with ten cottages sleeping six persons, falls into the 50+ band and will have a 71% increase levied against them. The likely turnover of this business will be from £200,000 to £300,000 depending upon location and quality. The businesses affected are all Microbusinesses by Government definition. Sadly, many of these businesses still will not benefit from the reductions explained earlier on this page.
Effectively Business Rates remains a 10% turnover tax on most Professional Self-Catering, businesses. So where does the 10% of letting value come from applied as Business Rates? It comes from the VO website, where the charts above and backing information is published.
This snapshot is taken directly from the Valuation Office website, it is in Practice Note 1: 2017 Holiday Accommodation (Self Catering). Decoded, what it shows is how the VO ultimately ‘rate’ a business. So, if you have a small four-star complex, the rateable value will still be 20% of your gross turnover (ex Vat) etc. Once the multiplier is applied, the net effect is that the business will be paying 10% of anticipated turnover in Business Rates.
The rises have hit this sector extremely hard and have pushed many to sale or closure, as these are not hugely profitable businesses. These complexes are still SMEs and should be supported by the Government as such.