get more from your holiday cottage business

Get more from your holiday cottage business

www.francisclark.co.uk

Chairman’s Welcome

John Endacott

Partner


Housekeeping


Programme

Simon Cooper, Partner, Stags

Alistair Handyside, Holiday Cottage Advice

Paul Collings, Tax Technical Partner, Francis Clark

Stuart Devlin, Digital Director, e-Strategy Ltd

Simon Cooper FRICSPartnerHoliday Complexes

• Improved market• Greater number of buyers• Cash buyers thin on the ground• Many aspirational buyers• Buyers primarily still coming from London and

Home Counties• Funding is still tight• Lenders are cautious

Current market conditions

The West Country is Stags Country Cornwall | Devon | Somerset | Dorset

• Location, location, location• House and residential/agricultural element• Business element• Valuation an art not a science!• Gross turnover after VAT important• Net profit before bank lending and drawings

also important• Appropriate yields are used as a multiplier

Valuing your holiday business


Recent sales

Liskeard, CornwallGuide price £795,000


Recent sales

Dorchester, DorsetGuide price £995,000


Recent sales

Beaworthy, DevonGuide price £1,600,000


Recent sales

Launceston, CornwallGuide price £995,000


• Could the property be divided?• Could planning permission be obtained for

residential use?• Permitted development rights on agricultural

buildings

Planning considerations


• Formal valuations for bank lending and tax planning

• Calculations for CGT liability on sale

Other work that Stags undertakes


Alistair Handyside

• Owners of Higher Wiscombe• Chair of English Self Catering• Chair of Premier Cottages• Chair Visit England Quality Standards

• National award Winners• Regional award Winners• Green award Winners• Guest feedback award winners

Who are we?

Agenda

• Checking out your Marketing Channels• Luxury Eco Huts• Blue Chip Luxury Lodge Market• Top Tips to take-away• Any questions?

Check out your marketing channels• Over 1000 possible websites to advertise your

property

Case Study, could apply to most

• Elite Cottages• 350 advertisers, at £125 = £44k• How much to build website, wages, coffee

etc?• How much left for marketing?

Less than £20k

What to check?

• No of Facebook followers? • Elite 98, Premier Cottages 12885, Blue Chip

5166.• Are those Facebook followers active, are posts

liked, followed and commented on?

What to check?• Check how they show up on Google• Paid for PR campaign? Ask to see coverage

• Non social media Marketing? Ask to see it

On the site itself

• Does it have online availability?• Do they charge for Special Offers?

• Any third party advertising?

• Find someone you know, and ask…any good?• Do they have a direct (and obvious) link to your

website and email address?

Summary

• Take the time to check out advertising partners.

• Make sure you track your booking sources.

Think about this…

A video to highlight the unique features of your property

Alternative Business Opportunities

• Luxury Eco Huts from Quality Unearthed• Luxury lodge developments from Blue

Chip

LUXURY ECO HUTS

A Buy to Holiday Let Opportunity from

Quality Unearthedwww.qualityunearthed.co.uk

The Huts

The Proposition

• Buy a bespoke hut from £30,000 up to £100,000 per unit from a range recommended by QU. Each of the huts is built by reputable British companies all of whom have strong green credentials. Prices include all furnishings, inventory and off-grid utilities package.

• Lettings service provided by Quality Unearthed Ltd, an established glamping agency.

• Net yields of 10% and 15% are achievable for the right locations. Returns are much higher than holiday cottages or barn conversions.

• Finance available through specialist lender who understands the sector. Payback of capital and interest over 5 years.

• Economic life of hut is at least 30 years, if well maintained. Much longer than a yurt or safari tent.

• Housekeeping to be provided by landowner following guidelines from QU

• Planning required. Should not be a major obstacle outside National Parks.

The Sites

Modest scale development comprising a single hut and up to a maximum cluster of 6 Secluded rural setting well away from farm buildings,

neighbours and busy roads. For guests, privacy will be key. Attractive outlook and far reaching views will be a major draw. Lake or riverside setting a plus but must be flood free. Paddock or meadow without intrusion from sheep and cattle. Clearing in wood. Hard standing track access to site or within 100 metres.

Who are Quality Unearthed?

Glamping agency, part of the Quality Cottages and Quality Villas group QU has been trading for 3 years, the parent company for 30 years Customer base of 50,000

For further details of the service contact: Nick House 01386 881121 or 07766 810799 [email protected]

The Opportunity

• The Luxury lodge market is greatlyundersupplied and positively booming

• Revenues and booking numbers arerising steeply YOY

• It’s a young and affluent (future proof)market place

• Perfect for short breaks, and completelyunrestricted by ‘Peak’ seasons

Our Credentials• Blue Chip Holidays have more than 13 years experience in the 4&5 star

rentals market

• A 1000+ property portfolio (the largest of its kind in the South West)

• Over 100 luxury lodges under management

Consultancy• Experience in consulting on developments ranging from 1 to 150 lodges

• Advice on land/location suitability, product selection and mix

• Assistance with planning applications and funding

• Realistic returns projections

• Bespoke pricing benchmarked against real time marketdata

• Step by step guidance throughout the development process

• Savings on inventory procurement

The Benefit

Proven, low risk NET yields between 4% & 10% per annum

To find out more:Sam Wrigglesworth

[email protected]

Other Options

• Shepherds' Huts• Yurts• Pods

Top Tips

• Website, clear, accurate and Google friendly• Review marketing partners• Set up On-line bookings• Check competition, and check prices• Enable guest reviews• Get some great photos• Have a video made• Use Social Media • Keep the properties spotless

Get More From Your Holiday Cottage Business

Paul Collings ACA CTA TEP


Property Ownership - structure

Many different ways in which Holiday Cottage might be owned….

• Sole Trader;

• Partnership;

• Limited Company;

• Different tax regime for each – need to take advice with respect to both properties.


Expenses Generally

Profits computed in accordance with “normal” business principles…

• Insurance;

• Repairs;

• Advertising costs;

• Mortgage Interest.


Increasing mortgage tax relief…..

Mrs Smith purchases a property in 2002 for £70,000. It is now worth £150,000.

She has managed to pay off the majority of the borrowings attaching to the property. All that remains is £20,000.

Mrs Smith would be able to borrow a further £50,000 from this mortgage and still be able to obtain to claim tax relief on the amount involved.


Furnished Holiday Lets (FHL)

• New criteria introduced with effect for 2011/12 onwards

• To qualify as a FHL the following criteria need to be satisfied:

• Available for letting for more than 210 days per annum;

• Actually let for more than 105 days per annum; and

• Longer term lets should not be for more than 155 days in total.

• In addition the letting must be on a commercial basis.


Why is qualifying as a FHL relevant?

• It is important for Capital Allowance purposes.

• Important for Capital Gains Tax purposes.

• Also relevant for Pension Purposes


Repairs and Renewals

• Recent change of view from HM Revenue and Customs with respect to repairs in unfurnished Properties.

• Furnished Properties able to claim 10% wear and tear – need to ensure that property is FULLY furnished

• FHLs can claim capital allowances.

• Annual Investment Allowance can be claimed so same tax effect.


Capital Gains Tax

If meet FHL criteria then can claim Entrepreneurs Relief on Disposal.

Rate of CGT normally 18%/28% - in this scenario 10%.

Must meet criteria for 12 months prior to the disposal/cessation of the business.

Replacement of Business Asset relief also available – possibly a replacement business asset – potentially useful if looking to expand your business.


Entrepreneurs Relief

Clearly Entrepreneur’s relief is a valuable relief!

£ £

Sale Proceeds 250,000 250,000

Cost of property 50,000 50,000

200,000 200,000

Annual Exemption 11,000 11,000

Chargeable Gain 189,000 189,000

52,920 18,900


Replacement of Business Asset Relief

A furnished Holiday let is sold for £250,000 crystallising a gain of £200,000.

Two years after the disposal a second furnished holiday let was acquired for £300,000.

Any tax arising on the earlier disposal can be “rolled over” into the new asset.

The base cost of the “second property” is £100,000 – the tax on the earlier disposal is therefore effectively “deferred”


Don’t forget VAT……..

• Provision of Holiday Accommodation is a “taxable supply” for the purposes of VAT

• Does your structure mean that you should be registered for VAT?

• Holiday makers are unlikely to want to pay VAT

• Consider VAT recovery using pre-registration rules


Inheritance Tax

HMRC used to allow Business Property Relief at 100%;

However changed their view and challenged the taxpayer in the case of Pawson.

Now likely to challenge availability of relief.

Increase in Inheritance Tax Payable

- What else can be done? Structure of Business? Other business assets…..can Balfour style planning be utilised?

Soc ia l Media Ins ights 2014

S t u a r t D e v l i n

Questions?


(c) copyright Francis Clark LLP, 2014

You shall not copy, make available, retransmit, reproduce, sell, disseminate, separate, licence, distribute, store electronically, publish, broadcast or otherwise circulate either within your business or for public or commercial purposes any of (or any part of) these materials and / or any services provided by Francis Clark LLP in any format whatsoever unless you have obtained prior written consent from Francis Clark LLP to do so and entered into a licence.

To the maximum extent permitted by applicable law Francis Clark LLP excludes all representations, warranties and conditions (including, without limitation, the conditions implied by law) in respect of these materials and /or any services provided by Francis Clark LLP.

These materials and /or any services provided by Francis Clark LLP are designed solely for the benefit of delegates of Francis Clark LLP. The content of these materials and / or any services provided by Francis Clark LLP does not constitute advice and whilst Francis Clark LLP endeavours to ensure that the materials and / or any services provided by Francis Clark LLP are correct, we do not warrant the completeness or accuracy of the materials and /or any services provided by Francis Clark LLP; nor do we commit to ensuring that these materials and / or any services provided by Francis Clark LLP are up-to-date or error or omission-free.

Where indicated, these materials are subject to Crown copyright protection. Re-use of any such Crown copyright-protected material is subject to current law and related regulations on the re-use of Crown copyright extracts in England and Wales.

These materials and / or any services provided by Francis Clark LLP are subject to our terms and conditions of business as amended from time to time, a copy of which is available on request.

Our liability is limited and to the maximum extent permitted under applicable law Francis Clark LLP will not be liable for any direct, indirect or consequential loss or damage arising in connection with these materials and / or any services provided by Francis Clark LLP, whether arising in tort, contract, or otherwise, including, without limitation, any loss of profit, contracts, business, goodwill, data, income or revenue. Please note however, that our liability for fraud, for death or personal injury caused by our negligence, or for any other liability is not excluded or limited.

Disclaimer & copyright