Covid-19 VAT Reduction

Advice on VAT Reduction from EQ Accountants

The VAT rate applicable to a transaction is dependent on the date of supply and the VAT rate in force at the time.

Transactions where a valid VAT invoice has been raised between 1 October 2021 and 31 March 2022 will be subject to VAT at 12.5% even if the time of supply is post 1 April.

If no VAT invoice is raised and just a deposit is paid then if the holiday is post 1 April the whole value will be subject to 20% VAT.

Please see the attached link to a more detailed article with examples covering most scenarios:  https://www.eqaccountants.co.uk/updated-guidance-for-holiday-accommodation-providers-regarding-the-reduced-vat/

Non – Domestic Rates: 2023 Rates Revaluation

Non – Domestic Rates: 2023 Rates Revaluation

‘”Assessors’ offices across Scotland are currently preparing for the non-domestic revaluation which comes into effect on 1 April 2023.

A key part of a revaluation is the ingathering and analysis of information in order that rateable values are set as accurately as possible.

Accordingly, Assessors are issuing information requests, known as Assessors Information Notices (AINs), across the country. It is imperative that AINs are responded to, regardless of whether the property is receiving rates relief or not.

Where recipients have difficulty in responding, they should contact their local Assessor’s office without delay, particularly given that non responders are subject to a civil penalty, the amount of which can rise to very significant levels.”

Gary Bennet, President, Scottish Assessors Association

In order to change the use of a property from a domestic dwelling to a business on non-domestic rates (NDR), operators must confirm that the business meets the definition of a self-catering property as defined in The Council Tax (Dwellings and Part Residential Subjects) (Scotland) Regulations 1992:[1]

Self-catering holiday accommodation

Any lands and heritages—

(a) which are not the sole or main residence of any person; and

(b) which either—

(i) are made available by a relevant person for letting, on a commercial basis and with a view to the realisation of profits, as self-catering accommodation for short periods amounting in the aggregate to 140 days or more in the financial year; or

(ii) if they have not been made so available for letting in that year, are intended by a relevant person to be made so available for letting in that year and the interest of the relevant person in the lands and heritages is such as to enable him to let them for such periods.

According to the Non-Domestic Rates (Scotland) Act 2020, at each Revaluation (previously every 5 years, but, from 2023, every 3 years), the Scottish Assessors have to arrive at rateable values for all self-catering businesses.

For the majority of businesses on NDR, Assessors look at the rent which businesses pay for their premises, but self-catering units (SCUs), unlike shops and factories, do not have a sufficient amount of let subjects, so the Assessors have to seek a typical income and expenditure pattern for our sector. They ask for income, expenditure and profit over the previous 3 years, and the type of accommodation (house / flat / chalet). Given that investments can come in large chunks, they ask for three years of figures so as to iron out troughs and peaks.

Assessors Information Notices (AINs) are sent out by post to each SCU, requesting clarification of the following:

  • Is the property or are any of the units available (or intended to be available) for letting on a commercial basis as Self-Catering accommodation for short periods totalling 140 days or more in each financial year?
  • Is the property or are any of the units used as someone’s sole or main residence during part of the year? (e.g. for long-term lets in the winter months)?
  • Who operates the Self-Catering business?
  • What is your normal trading season?
  • What is the current range of tariffs for holiday lets, including nightly rates, if applicable? (Please enclose a price list, if you have one)
  • Is car parking included in the tariff?
  • Where do you advertise?
  • Please give the web address/url of the agencies you use for bookings.
  • Financial Accounts
  • Income Letting details
  • Expenditure details

The information must be provided within 28 days from the issue date or you may be liable for a civil penalty. You can do so by completing and returning the form by post or by email attachment.

This is a very detailed form to have to complete and a rather onerous process for operators, but one that we simply have to do as part of administering our businesses. The better the data the Assessors receive, the more accurate our rateable values will be.

The ASSC works closely with the Assessors before, during and after each Revaluations and we will provide further advice on how to fill out the form in due course.

Frequently Asked Questions

Q: I haven’t received a form, what do I do?

A: If you receive a form, return it within 28 days. If you don’t receive one, don’t worry – your Assessor may only be asking for a sample.

Q: What address will the form be sent to?
A: The AIN will generally be sent to the owners / tenant’s correspondence address rather than the address of the actual SCU/property.
Q: When do I have to return it by?
A: The time limit for completing the form is 28 days from the issue of the notice.

Q: I haven’t finalised my 2020-2021 accounts, what do I do?

A: Where figures up to year end 31/03/2121 are currently unavailable, and waiting for those figures to be compiled would mean a significant delay in returning the form, then operators should complete for 2019 and 2020 years.

Q: What are the penalties associated with the new Civil Penalty regime?

A: Section 30 of the Act states that if a person fails to comply with an assessor information notice within 28 days (section 26(3)), the assessor must issue them with a penalty notice stating they are liable to a penalty of £200 or 1% of the rateable value, whichever is greater (or £1,000 where the property is not entered on the roll) (section 30(3)). 42 days after the penalty notice is given, the person becomes liable to a further penalty of £1,000 or 20% of the rateable value, whichever is great (or £10,000 where the property is not entered on the roll) (section 30(4)), and 56 days after the penalty notice is given (or 14 days after the first increase), the person becomes liable to a further penalty of £1,000 or 50% of the rateable value, whichever is great (or £50,000 where the property is not entered on the roll). Non-Domestic Rates (Scotland) Act 2020 (legislation.gov.uk)

Q: What evidence of letting do I need to provide in Part C?

A: Currently, completion of Section C of the Assessor Information Notice will be sufficient, but this will change, in future years, as new Regulations, evidencing 70 days actual use, are due to be put in place, with effect from 1st April 2022.

Q: How do I fill in Part E under Expenditure if I carry out all the work myself?

A: Under ‘Other Expenditure’, you could add something along the lines of: Not included as paid expenses in our annual accounts is all the work carried out to operate the business which is fulfilled by the two owners/partners.  This includes:

  • Cleaning and other duties for each and every changeover between lets – x people x x hours per changeover (approx xx person-hours per year). 
  • Travel time – x hours per changeover (approx xx person-hours per year)
  • Labour hours carrying out maintenance, redecorating, refurbishment and repairs.  At least xx hours per year, and often many more.
  • Administration, book-keeping, marketing, bookings management, social media, website development etc.  i.e. All the ‘background work’ for a successful business – at least xx hours per year, and often many more.
  • Industry engagement, continuous professional development, training, conferences etc – at least xx hours per year.

Q: Will high achievers be penalised with higher Rateable Values?

A: Assessors are genuinely seeking an average income and expenditure from a hypothetical tenant, so peaks and troughs will be taken into account in the overall rate.. Rateable Values are set per bed space to a formula.that is an established valuation practice.

Q: I heard that we would have to evidence over 70 days actually let as well as 140 days available to let?

A: The Scottish Government intends to bring Regulations that will require proof of 70 days letting, with effect from 1st April 2022. What form that proof will take, is still unknown, but the ASSC is meeting with Assessors in the coming weeks.

[1] https://www.legislation.gov.uk/uksi/1992/2955/schedule/2/made

Equal Opportunities: Impact of Short-Term Regulations on Women

The Equalities Impact Assessment (EQIA) [1] “demonstrates that there are no potentially negative impacts to equality groups as a result of the introduction of our short-term lets licensing scheme and planning control areas”.

However, according to the ASSC Sectoral Survey into Self-Caterer Access to Covid-19 Business Support Week 3 (April 2020)[2], the majority of self-catering businesses are run by either females or partnerships where the self-catering element of the business is managed by the female[3], with just 12% of operators being male.

This is conducive with females being able to fit the operation of their business around child-care and other responsibilities. The prejudice applied to the Scottish self-catering sector will therefore have a disproportionate impact on women.

Case Study 1

 “Why am I so concerned about the future of tourism in Scotland?

I am a 75 year old female.  For almost twelve years I have managed a two bedroom flat in Edinburgh which I run as a small holiday let business.  The income from this, while modest, is a very valuable adjunct to my small state pension and has given me much pride and pleasure.  

“My situation may well be typical of many other married women, juggling childcare with other commitments, but who have built up a small business of their own to provide them with an independent income or to boost a pension and in addition, very importantly, to maintain a feeling of self worth and satisfaction from doing a job well.

“I had previously let out this two bedroom flat to students, but did not wish to be tied down to any tenancy agreement where it would not be easy for me to evict undesirable tenants, or gain access for essential repairs and maintenance.  With my daughter’s invaluable help in marketing the property, I have really enjoyed  welcoming guests coming to Edinburgh for a variety of reasons, providing them with local information to maximise the enjoyment of their stay in comfortable and interesting short term accommodation. 

“The majority of guests are in the city for tourism purposes, some with children or elderly parents;  but I have also been delighted to welcome guests on short term work placements in the banking or retail sectors; families with a parent or child in hospital in the city, or who are in Edinburgh to receive treatment themselves; parents coping with the sudden death of a child in hospital and needing a private space to stay for a short time;  parents from various parts of the world who are anxiously visiting their student sons and daughters or who are attending their graduation; visiting university lecturers, researchers and post graduate students needing peace to work for a short time.  None of these guests chose to stay in hotels, which would not have given them the privacy and flexibility they required.

“There is a place for hotel accommodation, complemented by privately run holiday accommodation for those on a smaller budget or who require a private space for whatever reason. 

“I am proud to say I have had excellent feedback from my guests who have appreciated the personal contact with an owner who truly cares about their comfort and enjoyment. 

“The apartment is a ground floor flat, renovated to a high standard, with good sound insulation.  I have had no complaints from any of the other residents in the building, only gratitude has been expressed that I am active in keeping the entrance hall clean and the pavement swept and free of litter.

“I am deeply concerned about the future of tourism in Scotland if further legislation is introduced, which will only inhibit owners from investing in repairs and upgrades to their properties and equipment, if there is an ongoing uncertainty about the future of these small businesses where profit margins in many cases are already small.

“The current uncertainty causes me great anxiety about the future business prospects of my son and daughter, one involved in developing the software for  online booking systems for short term lets, the other with marketing carefully selected, good quality holiday properties.  Both have invested huge amounts of time and skill and have made financial sacrifices to establish their much praised and vibrant businesses but the current uncertainty of future sustainability has created unimaginable levels of stress.

“Countless European hospitality workers have not surprisingly decided to opt out, as it would appear that Britain is no longer such a welcoming place to live; the pandemic has had disastrous economic consequences for the catering industry;  and now the Scottish Government appears to be hell bent on shooting the Scottish tourism industry in the foot.  I am quite sure that the small but vocal group which supported Andy Wightman’s campaign within the Green Party will be rather surprised to learn of the wider ramifications and long term effects of their actions which may well affect their own holiday plans in the future.  And it will be too late.”

(Owner of one holiday let property in Edinburgh)

Case Study 2

I am a working mother, a decade in to my career in an industry I love.

“I manage Holiday Lets in Edinburgh on behalf of private owners, and take great pride in welcoming respectful guests to quality accommodation, and sharing with them the city I choose to call home.

“The past few years has seen a growing narrative around Edinburgh Holiday Lets that is soaked in vitriol. It is a personal argument that does not consider the real facts or the real people at the heart of this vital market. A market that provides elasticity in tourism accommodation, £867 million a year to the Scottish economy, and hundreds of jobs.

“Those who take umbrage with the concept of Airbnb seem to picture unscrupulous property barons, living in tax havens. The reality could not be further from the truth. The majority of people most prevalent in this industry have two things in common: they are are women, and they do not own the properties that they service. The introduction of onerous and unjustified regulation that will all but wipe out Holiday Lets in Edinburgh may force owners to reassess how they capitalise on their assets (or worse, leave them sitting empty), but the impact on this community of hardworking women will be devastating. The 10 women that I employ locally, and the many women-led businesses that we work closely with in Edinburgh, the hundreds of women managers, cleaners, and operations teams across Scotland. We simply will not survive.

“I am deeply concerned for the future of my industry, and for my ability to provide for my family post-regulation. The truth is that the inevitable destruction of the Holiday Let market in Edinburgh will leave me not only without a job, but also having to face finding a new profession and starting my career from scratch. 

“This is what I do, this is who I am.”

Case Study 3

 “After obtaining two degrees in my twenties I had the privilege of teaching and supporting young adults in High School with additional needs – a challenging but rewarding job which I cherished for almost a decade. Meanwhile my husband had been building Harpers Concierge Services with me in an advisory role.

 “Five years ago we had our son and with that came a shift in my view of work – I loved my job but teaching is incredibly inflexible. One of the most important things for me as a parent was to be able to give my son my time, be there when he wasn’t well or his first day of school etc and I knew that the best way to enable this was to step back from my job and take a more active role in Harpers.  

“My job allows me to have control over my work life balance way more than my previous role. I was also able to return to work in a more gradual and supportive way that not only benefitted me but also my sons development in those early years. Even now I can drop him at school in the morning and head to work – something I would never have been able to do as a teacher.

“I think it’s important to note that our small business is not only part owned/run by a woman, but also supports other female led and inclusive businesses – we work alongside 3 cleaning companies whose staff and owners are predominantly women and 4 other agencies with women at the helm. Women supporting women is the keystone to our industry. 

“The proposed legislation is overwhelmingly concerning for our business and its viability moving forward.  

“I have always felt that the most appropriate course of action would be an online portal where applications are made with the relevant safety certification attached. Once a license is agreed there should be a system where complaints can be logged – therefore properties are safe and problem flats can be recognised and removed. No one should face problems in their homes due to any kind of letting and unsafe properties are a risk to everyone – this is what needs action, not a full blown attack on professionals who work incredibly hard to ensure all parties are happy. I am a confident and capable woman but I will admit that the behaviour of anti-holiday let groups has left me feeling on edge at times, there is a tension in the air that is unsettling and the only way to stop the threat of vigilantes is to have an appropriate scheme in place. 

“I come from a long line of women in business and I am proud to be a director of Harpers Concierge Services.”

Case Study 4

“I set up the short term lets side of Dickins in 1998. My mother had set up our long term letting business in 1988. I’ve always been proud to run a women led family business. My company has established an excellent reputation. We’re trusted by neighbours as a safe pair of hands too. 

I employ 4 women. Two are single mothers – one has an autistic daughter. 

“I’m the main bread winner in our family. I’m 53 and have been doing this job for 23 years. I have two young children and definitely need to keep working. I have no idea what I’d do if I needed to create a new way of earning my living. I don’t have an asset I can sell as obviously my business would be considered to be worthless. It truly does beggar belief. During Covid my husband and I drew £1,500/month from the business so that we could keep the business afloat and staff employed. The idea that coming out of that terrible period for business, we’re now in a head on fight for the life of our business with the Scottish Government and Edinburgh Council beggars belief too. The flippant way in which Adam McVey says we’ll have to get a new job or liquidate our assets feels unbelievable.

“Dickins does an excellent job of marketing Edinburgh. We have excellent social media and write a great blog celebrating the city and local businesses. It’s beyond depressing that our own council doesn’t begin to recognize the important role we play in the life of the city.

 “Most of the housekeepers we use are women too.”

Case Study 5

“I am the Marketing Director of Bookster, which is an Edinburgh-based property management system which has been supporting holiday rental managers for 10+ years. 

“Our clients range from professional individuals to agencies and as a company we have supported and encouraged the professional growth of the industry. 

“For our Edinburgh based clients, this legislation feels very heavy-handed in its approach. There are a minority of unprofessional players which need to be addressed, however this legislation is effectively closing the industry based on that minority, rather than working with the local associations to resolve the problems. 

“I have two major concerns relating to this legislation. The first is damage to the economic revenue which is generated by this industry which will have a ripple effect across the communities.  

I’m also worried about the damage to the livelihoods of holiday rental professionals which includes many supporting industries, from cleaners, concierges, software providers, bedding and linen suppliers, maintenance employees, and welcome basket providers.”

Case Study 6

 I am the owner of an award-winning Scottish Holiday let Agency and have devoted 15 years of my life to self-catering.  I have a Masters Degree in Psychology but having previous experience in the tourism Industry and in between jobs, I chose to start a business in an industry I love and that is promoting our lovely country and welcoming guests to Scotland.  I love the personal touch that self-catering embodies. I also chose to start my own business in this industry because I saw opportunities and it gave me flexibility and the ability to raise a family.  The first apartment I managed I did everything from the cleaning to processing the bookings as many operators do – it’s hard work.  

 “I have had the fortune to meet many amazing people over the years, complete leadership training, join a tourism board and mentor young women coming up in the tourism industry all because of this amazing industry.

 “I believe that women will be detrimentally affected if this legislation goes ahead as is.  This is because the majority of people I have met in this industry (from cleaners to Property Managers have been women).  I currently employ 3 women and the majority of my employees have been women.

“This proposed piece of legislation will throw the baby out with the bathwater and not achieve anything other than take away accommodation offerings to guests (hotels are not self-catering) and close down professional businesses and livelihoods.  The ASSC has offered a viable solution to the issues surrounding self-catering raised by the Scottish Government and others.  Why, why, why won’t the government listen?

“We are hard working and relatively low paid workers in the tourism industry and do not deserve to be treated like this. It is shocking that politicians have suggested that we can liquidise our assets – I have no assets as like many others, I am in the service industry.  

“This industry is composed of many people/companies with differing skills and backgrounds (from tech to marketing) and is not the cliche that the media purports, simply full  of property tycoons taking over all the housing stock and out for a quick buck!  

“I am sick with worry and fed up being sick with worry after the pandemic.  If the Scottish government goes ahead with this, Scotland will simply lose out:

  • Lose out on the huge contribution that self catering gives to the Tourism industry.  
  • Lose out on investment as it is a highly entrepreneurial and innovative industry.
  • Lose properties sitting as second homes being used to generate money into the economy.  They will sit empty
  • Lose opportunities for women and startups           
  • Lose entrepreneurial talent – they will move elsewhere
  • Lose Visitors – our guests come back to us again and again as they know and trust us

“I will have to retrain in my 40s and my business (pension) will be worthless.  All the VAT, NIC and PAYE my business has contributed seem to mean nothing… I have pride in what I have achieved and what I have contributed to society.  If I retrain I will not start another business employing people; our government does not value small, Scottish businesses.  

“Big business (many multinationals) will benefit from this legislation I am sure but our visitors and local population will not.”

Case Study 7

“I started looking for a way to financially support myself when it became clear that my long-term health issues weren’t going away (I have fibromyalgia and an inoperable herniated disc.  Neither will heal or go away; they’re here for life).  I wanted to do something I enjoyed, something I’m good at, and also something that made other people happy.  I’m Edinburgh born and raised; this city is my first love and, even in my early forties, I still roam the streets and marvel at this stunning city I’m lucky enough to call home.

“I worked in financial services (primarily in mortgages) for around 12 years; I had a number of different roles over the years, yet my favourite part of every role was the same: the conversations I had with customers.  I loved speaking with them, tailoring the service to meet their needs, and seeing them happy with the service I provided.  I made their house purchase (which can often be seen as stressful and challenging) smooth and exciting…which is exactly as it should be; people should be excited and not stressed about buying a new house!

“I was made redundant around the same time my health began to decline further, and so I considered “how can I combine my love for Edinburgh with seeing happy customers?  How can I make a difference to people?  Wouldn’t it be wonderful if others could see Edinburgh through my eyes; through the eyes of a local?” And so, after around 2 years of research, and looking for the perfect property which met my long list requirements (it had to be on the ground floor, no neighbours through the walls, not on a busy road, in a factored property/development, and it also had to have private residents’ parking; hard to find in Edinburgh, yet I waited patiently to find the right property), I bought my first apartment in 2014.

“I bought the property with my parents as a means of providing me with an income, as well as supporting my parents in their retirement. It wasn’t long before the amazing reviews started, and I realised that I truly was providing my guests with a wonderful, family-friendly property, as well as a traditional, warm Scottish welcome (and a formidable service before, during, and after their stay).  I also noticed that many of my guests mentioned the same thing: how wonderful I was as an owner, and how helpful my many recommendations and advice had been when planning their stay here.  My parents and I set up another business and bought our second property in 2016, which also welcomes guests from all over the world (and also meets the exact same list of “must haves” I had when looking for my first property).

“Upon booking, I don’t e-mail my guests the address, a keycode, and a map of how to find the nearest Starbucks, ATM, and supermarket.  Instead, I provide recommendations, meet them on arrival, and help them get their bearings before they venture off out into this great city to explore.  I tell them where all the amazing, independent shops, cafes, restaurants, and gift shops are (and tell them where all our “hidden gems” are; things you won’t find in a guidebook, or referred to much online).  I recommend places I know to be wonderful, because I’ve been there myself.  As a self-catering owner, I’ve been actively involved in the planning of surprise 80th birthday breaks, wedding anniversary celebrations, family reunions, honeymoons, and even a wedding proposal.  I’m on hand to take delivery of made-to-order cakes, food deliveries ahead of guests’ arrival, and arrange dinner reservations and outings for them.  My satisfied guests return again and again, and recommend me to friends and family, as well; I’ve been blessed to see guests’ children become young adults over the years they’ve returned.  My guests come to Edinburgh and spend a lot of money enjoying all the fabulous sights and activities we have to offer as a city, and they support the countless small businesses that depend on tourism to survive.

“My business does all of that!  I do all of that, and it makes a difference.  I work long hours to manage my 2 properties, and also to support my community whilst providing an exceptional service at both of my wonderful properties. 

“If the proposed licensing scheme is introduced as currently planned, I will likely not be granted a license.  Both my properties are in shared stairwells and the City of Edinburgh council have already stated that properties in tenements/shared stairs will be declined on application.  This will result in the closure of a huge proportion of the self-catering properties in the city.  I will be forced to close both properties.  Although the massive impact this will have on my home, my family, and my life are immeasurable, I’m currently undertaking the painful, stressful, and deeply upsetting process of planning my “exit strategy”.

“This is already having a detrimental effect on my health; there’s only so much stress and worry a person can take before it spills over from being a mental health issue to a physical health issue.  The idea that I’ll likely be forced to demolish something I’ve spent so many years of my life building is devastating.

“I have not yet found another feasible option for how to provide an income for myself or support my parents in their retirement.  No other option that involves keeping the properties will provide us with much in the way of income once overheads are paid.  Selling the properties that took us years of hard work to save for, to buy, and to renovate will be subject to capital gains tax, and what money remains afterwards will not yield adequate income for us to survive on if placed into a bank account.

“Although I am still searching for alternatives, I do not yet know what I will do if forced to close.

“I am deeply saddened that the Scottish Government and the City of Edinburgh Council do not care enough about small businesses like mine; a small business that has spent so many years supporting local businesses, helping the tourism sector, and having a positive impact on my local community.”

Case Study 8

 “As a 70+ year old woman in the business of short term lets, who has worked hard all my life, paid taxes, adhered to all the rules and regulations life has bestowed upon me, I am finally forced to make a stand at the unbelievable stupidity of our councillors and politicians at the very thought of introducing a licensing scheme for short stay letting.  At every suggestion and proposition they have made for the reasons behind the introduction of the license, the ASSC have debunked and proved their information is incorrect.  The ASSC have also shown their willingness to work WITH them, and offered an excellent, proportionate, and fair alternative.  However, politicians and councillors are not listening to the very people who voted them in in the first place!  I hoped common sense would prevail, but I am astounded that I am having to fight such an unjust, diabolical proposal at my time of life.  At every turn, the council are bringing up new reasons to close our businesses down by introducing a costly license.  For what cause?  How will it be better, fair, improved, or justified?

“It won’t just affect my family business and have a horrifying impact on my income in retirement; this will affect the tens of thousands of businesses supported by us short term let owners.  Do they want more people in dole queues?

“I take great pride in the service I give in my business, and I am not ready or willing to be suppressed by these idiots trying to be dictators.  What good do they think this will achieve?  There’s no benefit at all!

“If it’s a fight they want…”

If you have a story, you’d like to share, please get in touch.

Footnotes:

[1] https://www.gov.scot/publications/short-term-lets-licensing-scheme-planning-control-areas-consultation-analysis/documents/

[2] https://www.assc.co.uk/policy/covid-19-assc-business-support-surveys-2/

[3] Other responses included three-way partnerships, 70/30 female/male, whole business 50/50 but self-catering element female

[4] Data direct from Airbnb