Backdating business rates + council tax bands

skooby_doo

We have a separate building in our garden which was legally an annex to the main residential dwelling. This annex was actually let out as a full-time, furnished holiday let since August 2013. In August 2023 we applied to regularize it with a certificate of lawful development, which was finally granted in June 2024.

The property continues to be a holiday let. The council are now sending us a council tax bill (band A 'provisional'  for it, so we now have two separate council tax bills which looks set to cost us an extra £1400 a year. This bill clearly states that the property had an exemption up until the date that the lawful development certificate was granted.

This is provoking two questions:

If we register for business rates, and are successful, could the council claim backdated business rates for the years prior to June 2024? (Even though they are not attempting to claim backdated council tax).

And… since the main residence has effectively become smaller due to the annex being split off, should we seek to have its council tax band re-assessed?

lincroft1710

As the annex is a separate building in the garden, it is highly unlikely it was ever reflected in the band of the main house.


If the annex is a furnished holiday let then depending on which country of the UK you are in, it may fall to be subject to non domestic ("business") rating rather than CT. Effective dates for both NDR and CT are set by the Valuation Office Agency (Eng and Wales) or the Assessor (Scotland) not the council.


Would suggest you read this link

https://www.gov.uk/introduction-to-business-rates/self-catering-and-holiday-let-accommodation

elmer

It is the VOA who make these decisions about your Council Tax band and which relevant date they use for an NDR decision so you would be better asking the VOA for advice Once the VOA have made a decision they tell your council so that they bill according to that decision
the council do not get to decide when to bill from

skooby_doo

Thanks. We are in England. We only let one property and I am confident it would qualify as a full-time FHL. I am less certain about it's rateable value… the government website lists many other properties in the area but not much detail as to their size so I am not sure how to make fair comparisons to guess it's value.

Is this switch from CT to rates normally done proactively by the VOA? As in… if we did nothing, and paid CT for a year, would they at some point send us a letter to check the status? Or is this something that always rests with the owner (which I was assuming).

We've never dealt with business rates before, at all. I don't know what to expect. We would prefer to pay less if possible but don't intend to break the law!

lincroft1710

Contact the VOA and explain the situation. They should send you a form to complete (see the link I provided).

Savvy_Sue

I think one other issue you have to think about is that if you are paying business rates on the extension, then when you come to sell the house you may have a CGT liability (which may be there anyway, given that it is not your primary residence).

It may be sensible to look for an accountant with expertise in the area of holiday lets to give you some guidance, especially in relation to whatever plans you have for the let in future. 

Bookworm105

Savvy_Sue said:

It may be sensible to look for an accountant with expertise in the area of holiday lets to give you some guidance, especially in relation to whatever plans you have for the let in future. 

I agree. As a business asset it will be subject to CGT when you sell the property as it will not be included in the main residence exemption applied to your main home.

You also need to be very careful about whether to claim capital allowances on the building if it has been brought into the FHL business as an asset of that business. An accountant would be essential to advise on that aspect of your profit calculations and so income tax payable.

Also, depending on the construction and nature of the "separate building" it may be possible to claim it is a "wasting asset" (item with expected life <50 years) and so it is exempt from CGT. For example, I would argue that many "garden rooms" are glorified portacabins, so no way do they have expected life >50 years

You would be wise to seek an accountant with good knowledge of CGT, not all accountants do...

skooby_doo

Thanks for the advice.

The building is a converted barn of brick, stone and pantile construction. The LDC gave it a status of 'separate dwelling for small-scale holidays let usage (class C3)' which apparently is unusual because C3 is residential and so that appears to be a bit of a contradiction in terms.

I do think that we would probably have a CGT liability if we now sold; and certainly if we split the title and sold the holiday let which might be a possibility at some point.

I think that given the council have billed us for council tax, we will probably just leave it alone for now and pay that. Though I'm still somewhat unclear about the burden of responsibility re. business rates registration. Eg. if a business like this is paying CT but qualifies for business rates, are the business owners breaking the law by not applying for such? I have read that with holiday lettings, one can fall in and out of the criteria for business rates year-by-year, if lettings rise and fall. It seems potentially quiet complex!

lincroft1710

If you read the link I provided, you would see whether the annex was liable for CT or NDR. As I have said previously if you think you should pay business rates then you should approach the VOA. If your property qualifies you may get Small Business Rate Relief and either pay no or reduced amount of rates

https://www.gov.uk/apply-for-business-rate-relief/small-business-rate-relief