VAT on holiday let income

[Woolless]

Hello all,

We have a former bothy attached to the end of our farmhouse. The previous owner converted it to accommodation for a live-in groom for her horses. The addition of a door and a small kitchen will give us the option of renting it out as a self-contained holiday let, through Air bnb initially, I think.

I believe I am right to say that VAT will be payable on the income generated. So for every £100 handed over from Air bnb, we will have to give £16.66 to HMRC. The alternative is that this venture is put in the wife's name rather than the farm partnership, which would avoid paying the ongoing VAT but obviously we won't be able to claim it back on the conversion or other ongoing expenses either. This is the course advised by our accountant. However, he advises that all utilities, bills etc. in her name, new bank account.

I'm not sure, as obviously signifcant household expenses/repairs go through the farm books and retaining the new venture on the farm side would help with this. Also, there's the potential for larger future expenditure, such as getting the farm road re-surfaced. My fear is that the financial benefit would turn out to be marginal and the hassle considerable in keeping the two ventures separate.

What do others do? TIA.

 

[jellybean]

You need to be careful, adding a kitchen may mean you are classed as having 2 dwellings, therefore 2 lots of council tax. It happened to us. started off by putting business rates on out apartment which is part of the farmhouse. We claimed the VAT back on the cost of building the kitchen so had to charge VAT on the lets. That, together with the rates made the whole thing non viable. Told them we would cease trading, which we did, within a week an offficious little git came out, saw the kitchen and slapped council tax on i

Go through all possible ramifications in your mind and take advice(in writing) if you are not sure.

 

[Hilly]

Hello all,

We have a former bothy attached to the end of our farmhouse. The previous owner converted it to accommodation for a live-in groom for her horses. The addition of a door and a small kitchen will give us the option of renting it out as a self-contained holiday let, through Air bnb initially, I think.

I believe I am right to say that VAT will be payable on the income generated. So for every £100 handed over from Air bnb, we will have to give £16.66 to HMRC. The alternative is that this venture is put in the wife's name rather than the farm partnership, which would avoid paying the ongoing VAT but obviously we won't be able to claim it back on the conversion or other ongoing expenses either. This is the course advised by our accountant. However, he advises that all utilities, bills etc. in her name, new bank account.

I'm not sure, as obviously signifcant household expenses/repairs go through the farm books and retaining the new venture on the farm side would help with this. Also, there's the potential for larger future expenditure, such as getting the farm road re-surfaced. My fear is that the financial benefit would turn out to be marginal and the hassle considerable in keeping the two ventures separate.

What do others do? TIA.

I pay the vat and the income tax etc etc I don’t see why so many are going into holiday let’s they are not the cash cow they made out to be in the pub lol verging on a bloody waste of time yet a lot spending small fortunes on this stuff, I don’t get it myself but that’s life.

 

[Wooly]

Is the house as one or classed as two separate dwellings? If one,can you not rent it on the rent a room scheme which is tax free.

Don't forget you may have to pay business rates on it opposed to Council tax, if done legitimately as a holiday let !


You might be just as well off to just rent it out full time and let the tenant pay all the bills.

 

[Hilly]

Is the house as one or classed as two separate dwellings? If one,can you not rent it on the rent a room scheme which is tax free.

Don't forget you may have to pay business rates on it opposed to Council tax, if done legitimately as a holiday let !


You might be just as well off to just rent it out full time and let the tenant pay all the bills.

You get small bussiness rate relief if under 15 k I think , mines at the assessors as we speak if i have to pay rates it’s all over , we are taxed to death these days.

 

[Hilly]

Hello all,

We have a former bothy attached to the end of our farmhouse. The previous owner converted it to accommodation for a live-in groom for her horses. The addition of a door and a small kitchen will give us the option of renting it out as a self-contained holiday let, through Air bnb initially, I think.

I believe I am right to say that VAT will be payable on the income generated. So for every £100 handed over from Air bnb, we will have to give £16.66 to HMRC. The alternative is that this venture is put in the wife's name rather than the farm partnership, which would avoid paying the ongoing VAT but obviously we won't be able to claim it back on the conversion or other ongoing expenses either. This is the course advised by our accountant. However, he advises that all utilities, bills etc. in her name, new bank account.

I'm not sure, as obviously signifcant household expenses/repairs go through the farm books and retaining the new venture on the farm side would help with this. Also, there's the potential for larger future expenditure, such as getting the farm road re-surfaced. My fear is that the financial benefit would turn out to be marginal and the hassle considerable in keeping the two ventures separate.

What do others do? TIA.

Why £16. 66 , is it not 20% vat rate ? Thus £20 ?

 

[Hooby Farmer]

Why £16. 66 , is it not 20% vat rate ? Thus £20 ?

£83 ish +vat £16.66 would leave it £100 all in. £100 + vat would be £20

 

[Kam]

100 divided by 1.20 = 83.33
100 minus 83.33 = 16.67

 

[Hilly]

£83 ish +vat £16.66 would leave it £100 all in. £100 + vat would be £20

Of course my mistake lol

 

[Woolless]

You get small bussiness rate relief if under 15 k I think , mines at the assessors as we speak if i have to pay rates it’s all over , we are taxed to death these days.

The income from this would be well under 15k, so business rates shouldn't be a problem. Potentially more of an issue is having council tax charged on it, as @jellybean describes happened in a similar scenario.

@Wooly The house is classed as one dwelling now, was two before the last owner's time. We use it as part of our house now and would do again between occupancies for ourselves and our own personal guests. Definitely don't fancy having a permanent tenant there.

 

[Still Farming]

Airbandb may have a you and holiday maker prices beware as all the stoppages add up and your pride and joy goes for a song?
Also valuation office agency hot on holiday cottages, bed booked nights, availability etc etc, section 106 restrictions etc limiting you to lettings etc too.
If already converted all ok.
Let your wife run separately as vat nightmares otherwise and dont claim vat back on anything to do with it.
New business in her name, easy.

 

[Muddyroads]

Hello all,

We have a former bothy attached to the end of our farmhouse. The previous owner converted it to accommodation for a live-in groom for her horses. The addition of a door and a small kitchen will give us the option of renting it out as a self-contained holiday let, through Air bnb initially, I think.

I believe I am right to say that VAT will be payable on the income generated. So for every £100 handed over from Air bnb, we will have to give £16.66 to HMRC. The alternative is that this venture is put in the wife's name rather than the farm partnership, which would avoid paying the ongoing VAT but obviously we won't be able to claim it back on the conversion or other ongoing expenses either. This is the course advised by our accountant. However, he advises that all utilities, bills etc. in her name, new bank account.

I'm not sure, as obviously signifcant household expenses/repairs go through the farm books and retaining the new venture on the farm side would help with this. Also, there's the potential for larger future expenditure, such as getting the farm road re-surfaced. My fear is that the financial benefit would turn out to be marginal and the hassle considerable in keeping the two ventures separate.

What do others do? TIA.

We’ve been doing exactly this for the last 3 years. Advice from the accountant was to keep it as part of the business income, as HMRC could easily pick holes in trying to claim it as being an entirely separate business, so we pay VAT on income. A bit galling to see 20% going each quarter, but we have reclaimed a lot. As for rates, we got small business tax relief so pay no council tax on the let.
Re Airbnb: very happy with the system and occupancy rates. We state a minimum stay of 2 nights and find this is important. We also add a cleaning charge, so it doesn’t add any expense to frequent turnarounds. A key box is also useful so that you’re not tied to waiting for new arrivals. We won’t get rich on it, but enjoy meeting different people and it helps with cash flow.

 

[Woolless]

We’ve been doing exactly this for the last 3 years. Advice from the accountant was to keep it as part of the business income, as HMRC could easily pick holes in trying to claim it as being an entirely separate business, so we pay VAT on income. A bit galling to see 20% going each quarter, but we have reclaimed a lot. As for rates, we got small business tax relief so pay no council tax on the let.
Re Airbnb: very happy with the system and occupancy rates. We state a minimum stay of 2 nights and find this is important. We also add a cleaning charge, so it doesn’t add any expense to frequent turnarounds. A key box is also useful so that you’re not tied to waiting for new arrivals. We won’t get rich on it, but enjoy meeting different people and it helps with cash flow.

At last, some encouragement! Is your let a separate building/address?

 

[Still Farming]

VOA keen on technicalities and if you dont meet their criteria you wont get the rural rate relief and they will council band your cottage/cottages/ property accordingly.
Voa set rates, Council collect them.
They want to chase all the "good lifers", rent granny flats, huts etc, people in the street etc work from home and businesses that never pay rates that do well out of the system.
When a farm ,they hound you what ever.
You diversify, they want a slice of the action.

 

[Hilly]

https://abnb.me/AzNn9dHF3Z

If you fancy a holiday!

 

[Woolless]

VOA keen on technicalities and if you dont meet their criteria you wont get the rural rate relief and they will council band your cottage/cottages/ property accordingly.
Voa set rates, Council collect them.
They want to chase all the "good lifers", rent granny flats, huts etc, people in the street etc work from home and businesses that never pay rates that do well out of the system.
When a farm ,they hound you what ever.
You diversify, they want a slice of the action.

Is VOA an England/Wales thing or Scotland as well?

 

[Still Farming]

Got to be taxes in Scotland simular??

 

[Woolless]

Got to be taxes in Scotland simular??

Oh, don't worry about that! I had Scottish Borders Council on to me about rates for sporting rights, so I think it would be them.

 

[Woolless]

https://abnb.me/AzNn9dHF3Z

If you fancy a holiday!

Nice place

 

[farmerm]

https://abnb.me/AzNn9dHF3Z

If you fancy a holiday!

Given your views on Europe, should the photo captioned Dogs Welcome read as "Dogs Welcome but no Europeans" In all seriousness though, that looks like a very tidy set up.