Financial

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Commission Rates and Net Returns

Our commission is 15% + VAT for the 12 school holiday weeks (excluding February half-term) and 20% + VAT on the remainder. We do not increase these rates if we become involved with arranging housekeeping; we charge a monthly fee (see below). We do not offer discounted rates to tempt you in and then raise the rate later, we think that is unprofessional.

There is a natural tendency for owners new to holiday letting to be mislead by peak summer rent levels. Whilst this is important, the real question is 'what will my net return be?' Rent levels at other times of the year, occupancy and commission rates as well as the peak rent provide a clearer picture.

Commission

Commission is charged on rent (plus any pet income) and only relates to obtaining bookings: 15% + VAT on School Holiday weeks (excluding February half term); 20% + VAT on the remainder. This commission covers the enire marketing and booking process; it does not cover problem solving at properties, see below.

Joining Fee: £150 + VAT. Annual Renewal Fee: £30 + VAT. Visit Britain Inspection Fee: £67 + VAT

Housekeeping: 2 options as detailed on page 10 of the prospective owners booklet. 1. Owner fully responsible. Assistance in finding a housekeeper, if required, will be charged for. 2. Dorset Holiday Cottages - Office Support - Annual Contract:

1 & 2 Bedroom Properties: £25 + VAT per month
3 Bedroom Properties: £30 + VAT per month
4 or more Bedroom Properties: £35 + VAT per month
These fees include housekeeper recruitment, processing montly invoices and help with solving problems ie. 4 telephone calls and one written contact free of charge. Subsequent calls are charged at £2; second written contact at £20.

Call-out charge - applies to both options: £20 per hour plus 40p per mile where applicable.

Insurance: £2 million of Public Liability cover is required. .A local broker very familiar with holiday letting properties is David Upshall, Dorchester - 01305 268883

Council Tax arrangements/discounts have been reviewed and it may be worth opting for a Business Rate Valuation which removes any restrictions on letting.

VAT: Holiday rental is a 'taxable supply' and may be liable to VAT; approx 17% of the rental may be lost unless the letting is done by an individual or partnership that is not registered for VAT and continues to have a total turnover below the VAT registration limit (currently approx £60k).

Other tax implications: HMRC currently regards furnished holiday letting as a business. You can usually deduct from the net rent received, repairs/renewals of fixtures, fittings and the fabric of the property together with all cleaning and laundry rates, insurance, electricity/gas/oil/logs, TV licence, gardening, mortgage interest. Losses can be carried forward. Profits are regarded as earned income (it may be advisable for the property to be in the name of the lower income earner).

Edwards & Keeping, our accountants (01305 251333) have provided the following statements:

Below is a summary of the furnished holiday lettings rules based on our understanding of the current legislation. It is in no way a comprehensive review of the legislation or individual circumstances and as such it is not intended to be relied upon as tax advice or used for tax planning of any sort. If you are in doubt regarding your specific tax situation, please contact your tax advisor, if you do not have one, we would be most happy to help.

If you let out a furnished holiday home in the UK (or elsewhere in the European Economic Area) the rental income may be treated differently for tax purposes from other rental income, subject to meeting a number of qualifying tests.

To qualify as a furnished holiday letting the property must:

* be furnished and located in the UK or EEA;
* be available for letting to the public as holiday accommodation for at least 140 days a year - this may rise to 210 days;
* be actually let as holiday accommodation for at least 70 days a year at the market rent - this may rise to 105 days;
* not be let for a continuous period of more than 31 days to the same tenant where such periods of long term occupation exceed more than 155 days a year.

These tests will be applied to a relevant period of either:

a. The normal tax year if it is a continuing period of holiday letting;
b. If the letting is new, the first 12 months starting from the date of the first letting; or
c. If the holiday letting is ended, the last 12 months ending on the date fo the last letting.

Tax Advantages

If the property meets the qualifying tests during the relevant period the follwoing tax advantages may be available:

* Losses can be set against total taxable income and are not restricted to the rental business. As legislation is under discussion this may change to: losses can be set against profits on the qualifying property.
* Capital allowances in respect of qualifying expenditure can be claimed on integral features, furniture, furnishing and the like in the property.
* The property qualifies for a number of Capital Gains Tax reliefs including Entrepreneurs Relief, Rollover Relief, and Gift Holdover Relief.
* Inclusion of income as relevant UK earnings when calculating maxium pension contributions.

Inheritance Tax - Furnished holiday letting do not qualify for Business Asset Relief.