It was announced in the Autumn Statement that the business rating eligibility of properties used as furnished holiday lets would change from 5 April 2023.
Further details were released on 2 April. Only those properties which are available for let over 140 nights and were actually let for at least 70 nights within the rating year (to 31 March) will come within the charge to Business Rates (BR). Non-qualifying properties will be charged under the Council Tax (CT) provisions, which will generally be a higher liability, not least because here is no equivalent “small business relief” for CT payers.
Data to enable the transition to take place will be gathered by “requests for information” during the 2023/4 operating year “to check that the eligibility rules for self-catering properties are met” failure to return the form or completing it incorrectly can lead to a financial penalty or even prosecution”.
It should be noted that there are important differences between the Business Rates definitions and the income tax rules for qualifying furnished holiday lettings, which will mean that is entirely possible that some qualifying FHLs will not be eligible for business rating or vice versa.
- The business rates eligibility criteria are determined by nights rather than days – so, for example, a property let out from Friday evening to Sunday morning would have been let for two nights for the purposes of meeting the business rates definition but three days for income tax purposes
- The “availability” condition (when the property is open for letting) is 140 nights for BR, and must be satisfied for both the current and previous years, whereas for FHL purposes it is 210 days in each year
- Similarly, the period during which actual lettings were achieved is 70 nights in the previous 12 months for rating purposes, but 105 days in the tax year for FHL
- Whilst FHLs can benefit from elections for averaging between multiple properties, special opening year rules and a period of grace where a property fails to qualify in one year but does so in a later year, there is no such equivalent for BR
- Generally, BR is determined by reference to a 31 March year end, whereas FHL legislation is based on a fiscal year
- There are different and more stringent rules in Wales, where the availability and lettings limits are 252 and 182 nights respectively