What,Self,Catering-Short,Term, business, insurance What is a Self Catering-Short Term Let Property?

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In the UK a short term let property is sometimes described as a furnished holiday letting which is the HM Revenue and Customs term. They are properties let for periods of anything from days to weeks rather than the more common 6 month letting done for normal buy-to-lets. The HM Revenue and Customs definition is important because they treat these properties as a business rather than as an investment which means there are important tax advantages over longer term lets. Their definition (from the 2005-2006 tax year when the definition was updated) is:• available for holiday letting to the public on a commercial basis for 140 days or more, and • let commercially for 70 days or more, and • let for periods of longer-term occupation (more than 31 consecutive days) for not more than 155 days during the year.What are the key differences between self catering/short term and longer term let properties • Short term let rents are normally higher than longer term let rental • The occupancy of the property will often be lower than for properties let for longer periods as there are more changeovers of occupants. • Short term let property is usually more comprehensively equipped than a longer term let. It is normal to provide facilities such as TV, DVD players and internet access as well as bed linen, towels, etc. • The owner of a short term let property pays for utilities, council tax, TV licence etc • Tax advantages are outlined below.Short term let properties and the equipment in them appear to suffer less wear and tear than longer term properties which can be regarded as protecting your investment. This is probably because of a combination of:• The owner or manager of the property being at the property frequently to do changeovers means simple maintenance is being done continually • Whilst people often ask to have facilities such as a washing machine, they do not often use them • People staying for a short period do not normally re-arrange furniture or attach things to walls • Short term let properties are usually let with terms and conditions rather than a lease. In long term lets, the tenant is empowered with many rights over your property, the terms and conditions should be drafted to ensure this does not happen in short term lets. • The visitor pays a deposit (normally of about 10% of the total rent) to reserve the property and then pays the full amount of the rent between 4 and 8 weeks in advance of their visit. This means the risk of non-payment of rent is low. • The marketing and management effort is much greater for a short term let property than for a longer term let. There is a constant requirement to be looking for new visitors and there are many more changeovers. • Less regulations. No licensing or landlord applications are required for the short term let properties. While the property still requires your duty of care (fire regulations, electricity and gas checks), you do not have to apply for a license, and no regular council inspections occur. • Landlords who live outside the city, can stay at their property when visiting.In summary, whilst the costs of a short term let are greater than a long term rental because more equipment is provided and the owner pays for more running costs than with a longer term let, the income can be more as well. There can be significant financial advantages in short term lets over longer term lets but only if the occupancy is high enough for the higher income to cover the extra costs, and it is appreciably more work to market and manage the property.Whether it is worth letting your property short term all depends on the occupancy you can get and the resources (your time or money to have the property marketed and managed) you are prepared to commit. The occupancy rate depends upon the location of the property and on marketing.Who uses short term let properties? The governments definition talks about holiday letting, but many of the people who use short term lets are visitors who are on business, attending conferences, undertaking courses etc. Edinburgh Flats Partnership marketing targets these people as well as holiday makers. We approach colleges and universities, theatres, conference organisers and companies, and provide them with links to our web-site as well as targeting the traditional holiday maker.What are the tax advantages?In the UK the tax advantages are: • Roll over relied on the replacement of business assets • Gifts relief on business assets • 'Entrepreneur's relief' which means that the first £1 million of capital gains are taxed at 10% rather than 18% • after 2 years the property can fall outside your estate for IHT purposesOther benefits are: • Business losses can be set against total income and are not restricted to the holiday letting business. They are not, however, allowable for the purposes of Class 4 National Insurance • Plant and machinery capital allowances for furniture and furnishing used in the holiday letting activity are available as well as on equipment such as vans and tools so long as they are used in the holiday letting business. • HM Revenue & Customs accept that Inheritance Tax (IHT) Business Property Relief(BPR) is available on properties used for furnished holiday accommodation. • For more information on the tax position see HM Customs and Revenue web-site HMRC Furnished Holiday Lettings.Everyone has a unique tax position and you should assess your own position. If in any doubt, take professional advice.Should I let my property short term?In our view the most important factor to consider is location. There are significant financial advantages to self catering/short term lets, if you can get a high enough occupancy. So it really depends on whether your property is somewhere where people will want to let short term. Edinburgh, especially the city centre, is a fantastic location for self catering lets because there is an active tourist industry, lots of conferences, universities and colleges and, of course, the festivals.