Tax raid that could hike the price of YOUR holiday: B&Bs, cottages and seaside hotels to be hit by business rates reforms
- Thousands of guesthouses in popular tourist spots face soaring bills
- Currently, firms with a rateable value of less than £6k don't pay business rates
- From April, the threshold rises to £12,000, with discounts on a sliding scale
- Proprietors claim the most charming guesthouses will be hit hardest
Holidaymakers face higher prices for staying in B&Bs, cottages and seaside hotels this summer because of a tax raid on family-run businesses.
Money Mail last week revealed how reforms to business rates — a type of council tax on firms — threaten to devastate Britain's High Streets.
From April onwards 500,000 shopkeepers, cafe owners, pub landlords and other small business owners will be charged up to ten times more, taking a £600-a-year tax bill up to £3,000 and forcing many to close.
Now it has emerged that guesthouses in popular tourist spots such as Eastbourne and Devon also face soaring bills.
Steep rises: Eastbourne guesthouse owners Karen and Mark Cheater will face a bill increase from £639 to £3,136
Owners say they will have no option but to pass on the blow to guests. Many small hotels, bed and breakfasts and self-catering cottages fear they'll have to shut down if holidaying families respond to price rises by going abroad instead.
The rises will be steepest in the south of England, where property values have soared.
Proprietors also claim the way the charges are calculated means the most charming guesthouses will be hit hardest.
Karen and Mark Cheater, who run The Langtons guesthouse in the seaside town of Eastbourne, say their bill will leap from £639 a year to £3,136.
Karen, 56, says: 'We will need to put up room rates, but I am not sure holidaymakers will pay them. They'll go to the big hotel chains instead.
'I thought the Government was supposed to help small businesses.'
The term 'business rates' is jargon for the council tax businesses pay on their buildings.
For cafes, restaurants and shops, it's based on the property size and location, and how much it would fetch if the whole building were let out.
In April, the Government is updating its estimated values for the first time in seven years.
The Department for Communities and Local Government claims no business will pay more than 5 per cent extra initially — but this does not apply where a property's value has risen so much that it's gone above the threshold for tax breaks.
Currently, firms with a so-called rateable value of less than £6,000 don't have to pay business rates, with discounts on a sliding scale up to £12,000.
From April, the threshold rises to £12,000, with discounts on a sliding scale for values up to £15,000.
In seven years, the rateable value of The Langtons guesthouse has gone from £6,600 to £14,750. That means their modest B&B is no longer entitled to the same tax breaks, even though it has not expanded.
For hotels and B&Bs, the Valuation Office Agency also takes into account the quality of the premises.
This includes occupancy rates, facilities such as a swimming pool or restaurant, any Michelin stars, the rating awarded by AA or Visit Britain and whether it offers laundry or room service.
It also examines the 'state of repair' of accommodation. Owners say that penalises guesthouses for refurbishing and puts owners off making improvements.
Karen and Mark have refurbished the rooms at The Langtons in Eastbourne since the last rates review in 2010.
'The Valuations Office Agency might have decided we are making good money, but our £65-a-night charge is only £5 more than it was then,' she says.
Kurt Janson, director of Tourism Alliance, says: 'These businesses make very thin margins compared to the larger hotels, especially in seaside and rural areas.
'A business that's just above the £12,000 threshold and has to compete with ones just under it is in trouble, as it cannot afford to put up prices and lose business to a small competitor not paying tax — but cannot afford not to, either.'
Analysis of 40,000 self-catering cottages across the UK shows the average four-cottage business will be hit with a 58 per cent increase in rates. Businesses with six cottages faces a 71 per cent increase, according to the South West Tourism Alliance.
It can take two-and-a-half years to get an answer after appealing against these hikes.
Alistair Handyside, 59, of the tourism body, owns three self-catering cottages called Higher Wiscombe with his wife Lorna, 56, in Stoneleigh, East Devon.
He faces paying £10,135 in business rates from April, up from £9,070. By the tax year 2021/2022 his bill will have soared to £14,728.
Hike: Alistair Handyside, 59, who owns three self-catering cottages with his wife Lorna, 56, in Stoneleigh, East Devon, faces paying £10,135 in business rates from April, up from £9,070
'I've spoken to people who have put their properties on the market because they will not make any money at all from April,' he says.
'I don't think the Valuation Office Agency has enough people to look at this properly, so they are making arbitrary decisions based on someone's accounts and profile, and seeing what they can get away with.'
Ron and Lesley Ayling say this may be their last year running Downs View B&B in the village of Upper Beeding, in West Sussex, after their rates jumped from nothing to £950 a year.
By 2021/2022 they will have to pay almost £1,700 a year. The couple let five bedrooms to tourists visiting the beautiful South Downs Way and live in three rooms downstairs.
Their rateable value has jumped from £5,500 to £13,000, pushing them above the tax-free threshold.
Crisis: Ron and Lesley Ayling say this may be their last year running Downs View B&B in the village of Upper Beeding, in West Sussex
Lesley, 61, says: 'I was absolutely shocked when I saw our new bill.
'I just don't know if we will make enough money to make the business viable. There are no similar businesses nearby, so our rates might have been calculated based on areas such as Chichester and Arundel, where you can charge a lot more.
'But we are in an ordinary village next to a petrol station, not a beautiful historic town, and just happen to be on the South Downs Way.'
Ufi Ibrahim, chief executive of the British Hospitality Association, says: 'Some independent hotels, B&Bs and restaurants will not survive and with them will go jobs and a lot of enjoyment.'
The Valuation Office Agency says: 'No small property will see more than a 5 per cent increase next year before inflation. If anyone is unhappy with a VOA valuation, they have an independent right of appeal.'
l.eccles@dailymail.co.uk
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