Business Rates or Council Tax, That is the Question
Members have increasingly been asking about alternatives to tenancies, ie licences and holiday letting agreements. Demands for double council tax (i.e. on second homes) are also raising questions. There are a few simple rules which will help you define which category your property falls into.
The Relevant Facts
A licence or holiday let agreement is ONLY suitable if the resident has their own home elsewhere, even social residents should be giving a 'home' address, even if they are between actual residences. On a longer stay, ensuring a home address is taken, and that access for weekly cleaning and maintenance (without giving notice, as you would to a tenant) will prove the holiday letting purpose of the stay.
Business rates are payable on holiday lets, but there are criteria to be met, the property must be available for at least 140 nights, and let for 70 nights. This means that you initially pay the Council Tax, ask the VOA for an assessment after 140 nights, then go back to Council Tax for a refund, once business rates has been granted. The cost of business rates is about the same as Council Tax, but if you just have 1 commercial property then small business rate relief can be applied so the bill is £0. It's a bit of a job to get there but worthwhile!
If you have 2 or more properties adjoining (ie blocks of flats), they can be combined to form a single hereditament for combined business rating by the VOA. In reality, 3 or fewer will likely still fall under the threshold for Small Business Rate Relief so this may be worth doing.
https://www.gov.uk/introduction-to-business-rates/self-catering-and-holiday-let-accommodation
A second home is not necessarily a holiday let (as it may not reach the holiday letting criteria), this is where double council tax is appropriate. in those areas that levy it.
A Monday-Friday, working away from home or otherwise using an HMO room as a part time arrangement is a suitable situation for a holiday letting arrangement, although an AST may be preferred because of mortgage conditions. The process to change to business rates on a property takes about 6 months, so may not be worthwhile if your tenant is working away and using your accommodation to do this.
Using a property as a holiday let on a buy to let or HMO mortgage is a no-no, it is a breach of your conditions or, if done deliberately, Mortgage fraud. Insurance also needs to be altered and the business owner needs specialist insurance to cover liability.
Further information here: https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2022