Business Rates on Guest Houses

Bed and breakfast and guest house properties pay business rates if short stay accommodation is available for more than 6 persons at any time or the bed and breakfast use rather than private use is the main use of the property. If business rates are payable, Council tax will also be payable on the part of the property which is private accommodation.

The rates payable is based on the rateable value of the property which in turn broadly represents the annual rent the property could be let for in the open market on a particular date, on full repairing and insuring terms. Rateable values are set by the Valuation Office Agency but rates are collected by local authorities, worked out by multiplying the rateable value by the national rate in the pound and then applying any allowable reliefs.

In arriving at overall rateable values for guest houses, the VOA takes into account the actual rents which operators may pay and also average trading information.  Evidence of actual rents is limited as many guest houses are owner occupied and where there is evidence, allowance has to be made for part of the rent being attributable to the private owner’s accommodation. Unlike some other property there is little or no link between the capital value of a guest house property and its rental value, which is more closely correlated to business returns.

Rateable values will be revalued in 2017 and the VOA have been sending out Forms of Return requesting trading information and details of any rents paid. The 2017 revaluation will be based on values at April 2015.

The VOA adapt the overall information to apply a rate per bed space to work out the rateable value of individual guest houses.   The main space price is based on a double/twin room with en-suite facilities with varying levels of value used for different types of room. For example, a single bedroom with en-suite facilities is normally about 70% of the main space value. The main space value for individual guest houses is varied within a range to reflect particular size, location and other physical factors and facilities.

You can appeal against the rateable value on a number of grounds including when a change of circumstances affects the property or its physical locality. To establish a fair and correct general level of rateable values in 2017 it will be worthwhile for guest house owners to join together and where appropriate and at the right time making early appeals.

I will briefly look at business rates on self catering accommodation next time.

Duncan Young
Mere Commercial Limited