UK reference only: is it worth a planning change from domestic to business to save paying rates?

[Perry90]

I have an apartment exclusively for renting out. It is currently residential so I have to pay domestic rates for it, that costs about £1700 per year. If I apply for a change of use with the local council and get it rated as a business, the business rates for the property are £0 (I have no other business properties) . My question is, are there any downsides to this, such as if I want to sell it in the future?

[Alexandra199 · Accepted solution]

Are you using the apartment solely for short term rentals? If you are then changing to business rates is a no brainer. You will need to get the property assessed by the Vaulation Office and then apply for Small Business Rate Relief (SBBR) which is usually 100% for small premises. All in all its a yes.

Now for the caveat:

SBRR my not last forever and there are changes in the pipeline. If they remove it for whatever reason you will be paying business rates which may be more than council tax

With the likely crackdown coming over the hill on holiday lets I think it is quite possible that these types of properties will no longer get benefits that were originally set up for small businesses. I cant see us getting away with this for much longer!

There are no downsides although if you did want to sell it later I would suggest getting it put back to Council Tax to save the new buyer a big headacahe.

[Perry90]

Just realised we also have a beach hut, it's not a business in any way but they are always rated on business rates, so I'd have two business properties, though small, I'd best check the total rateable value first

[Perry90]

The apartment has 3 very large bedrooms, just measured them and got 60m2 (including en-suites)
Just looked up a guest house down the road, they are being charged £1105/m2 for bedrooms, think we would be similar. If I've made the right assumptions, our business rates would be £66,000 so not a small business,! Thinking I'd best leave well alone 😁

[Mike-And-Jane0]

@Perry90 It may vary but in Derbyshire it goes by the number of single bed equivalent spaces so 3 king size beds = 6 single beds = £6000 rateable value

You don't get a choice to leave well alone - It has to be business rated and the council will catch up with you eventually.

Having two properties unless one is under a certain figure means you don't get 100% SBBR I am afraid.

[Alexandra199]

I would be really surprised if your apartment was rated at £66k. I have a 3 bedroom cottage that is rated at £4k. The rating system is very complex and you can’t just guess at it yourself. 

I have two properties and I get 100% SBBR on the larger one and have to pay rates on the smaller one but it’s still a lot less than council tax. 

[Mike-And-Jane0]

@Perry90 if you are running a business then you strictly have to get it business rated - you don't get to choose.

You may lose your rubbish collection but its quite cheap to replace.

You will be charged CGT when you sell but you will anyway if its not your residence. You should only pay at 10% under current rules.