An award-winning contemporary self build on the Devonshire coast
Claire Lloyd looks at successful examples and explains why it’s crucial to decide from the outset whether you’re undertaking this project to create a family holiday home or a business.
A self build can be the ideal means of achieving exactly what you want from a bolthole in the countryside, a retreat by the coast, or perhaps a second house near to family and friends. However, there is an important question to answer prior to taking on a project like this:
- do you want to create a holiday home which will be primarily for your own use, perhaps with family and friends visiting and even the occasional let to others;
- or will the property created be a business first and a place to holiday every so often, second (a ‘furnished holiday let’ or FHL).
But why make this decision so early on in the proceedings? Well, the distinction between the two carries a host of implications along the line, so it’s a good idea to have a clear understanding of your own intentions from the outset. Indeed, for some, this intention may evolve as a project progresses or perhaps once the house is complete — changing financial or personal circumstances may see a holiday home become a FHL used to generate income, or vice versa.
If you’re self building a holiday/second home for yourself, then you can reclaim VAT on many of the building materials you’ve purchased at the end of the project (in the same way as you would when self building a principal home). If, however, you’re building a FHL with the specific intention of letting it out most of the year, then it is likely to be considered a business, and that 20 percent spent on qualifying materials may not be reclaimed.
You can register the FHL you’re creating for VAT and recover some of the VAT paid out by this means. But bear in mind that this will subsequently mean that you’ll have to charge VAT on future letting, so it’s best to do your sums and establish whether the VAT savings here are really worthwhile.
Claiming Back Build Costs
There are, however, benefits to creating a FHL. One of the most notable relates to the items which can be written off against your taxable income. In addition to expenses such as holiday letting agency fees, utility bills, cleaning expenses, interest on the mortgage etc., capital allowances can be claimed.
“Heating systems, lighting, fitted bathrooms and kitchens and furniture can be claimed as capital allowances in this instance,” explains Tony Briscoe of DHC Accounting (dhcaccounting.co.uk), who offer a specialist service for FHL owners. “Consulting an accountant, particularly in the first year of running a holiday let, is advisable as it can be easy to go wrong with capital allowances. For example, you can not only claim for underfloor heating, but the specific screed needed on top. So, you can see how capital allowances can be a bit of a grey area.”
Establishing what items of your project may qualify as capital allowances and ensuring that they are invoiced for separately is a wise idea according to Tony Briscoe (making the task of collating capital allowances more straightforward later on).
In order to claim for capital allowances, a FHL subsequently needs to be a ‘qualifying’ business, with a number of criteria met. In the main, this relates to occupancy rates.
- The property needs to be let for 105 days of the year and available for let for 210 days (this has been raised in recent years; it used to be 70 and 140 days respectively). There are ways of ‘deferring’ if the property doesn’t let for 105 days, but again it’s advisable to take financial advice here.
- Another factor is that the property cannot be let out for long-term occupation (31 continuous days or more) for more than 155 days in a tax year (so longer winter lets are actually permissible).
A holiday let is more favourable than a ‘standard’ furnished buy-to-let property in this way, where only 10 percent of income can offset for ‘wear and tear’. This is typically the case for family holiday homes occasionally let out, too. But, as Tony Briscoe explains: “In such situations, it’s perhaps unlikely that you’d be seeing enough profit in the first instance to be charged Income Tax.”
Capital Gains Tax (CGT) is another area where the differential between building or renovating a property as your own holiday home, or as a FHL, comes to the fore. Selling on a second home will attract CGT, typically at 18 percent. Although there are currently ways in which you can reduce this sum, by choosing to elect your holiday home as your principal residence.
“But this is subject to certain conditions and it has recently been announced by HMRC that they intend to take this option away and private residence for Capital Gains Tax purposes will in future, be determined by actual occupation (as your home),” adds Tony Briscoe. (Again, an accountant should be engaged for advice.)
For those selling a furnished holiday let which has been run as a ‘qualifying’ business, then CGT could be set at an Entrepreneurs’ Relief rate, which is currently 10 percent. Or, you may be able to defer CGT if you go on to purchase another holiday let or business within a set period.
If the new house you’re creating will primarily function as your own holiday home then your personal tastes, style, and paraphernalia should quite rightly be both the starting point and backbone of the design and layout. This should after all be a place to unwind and partake in activities you do not ordinarily get time for at home.
But, if you’re planning on creating a FHL, then it’s crucial to think about your target market too if it’s to be a success commercially. By way of example if you’re building or renovating in an area popular with walkers or outdoor pursuits, then planning in a boot room (which may also provide an ideal place to store sandy beach gear, if you’re close to the coast) is a wise decision. In terms of finishes, you may want to consider a hard-wearing, easy-to-clean and/or dark-coloured flooring like slate, which does not show up muddy boot or paw prints so readily.
The layout is important too. Will the house be designed to cater primarily for couples, or perhaps three generations of a family? The layout of bedrooms should be planned accordingly, and the ratio of large sociable spaces like open plan kitchen/dining/living areas, to smaller, snug-like rooms, given thought.
It’s a good idea to think about the luxuries too which will ‘make’ the holiday experience. The self catering market is no longer considered secondary to staying in hotels and people want to stay somewhere which offers a little more luxury than at home.
A careful balance should, however, be struck between installing gadgets and kit which are impressive, practical additions, but are also easy to use. In other words, holiday makers shouldn’t have to leaf through a heavy user manual to find out how to turn up the thermostat.
On this note, heating the property is another area which should be given considerable thought, and just as importantly, the fabric of the build should be carefully detailed and insulated well to ensure the heat demand is low in the first instance. Focus on futureproofing the build for rising oil bills.
Finally, smart technology comes into its own in holiday homes and lets. Smart controls which will enable you to remotely turn the heating on or off from a smart phone, tablet or laptop, for example, or perhaps check in with security cameras (when unoccupied), are excellent ideas for those with properties some distance away.
Marketing a Holiday Let
It’s entirely possible to create a website, market and advertise a holiday let and manage bookings yourself — and on first inspection this looks like a much cheaper option. However, many of those featured over these pages opted for an agency.
Such companies already have an established market, so can help you hit the ground running, (hopefully) ensuring bookings from the start. There are some companies like Unique Home Stays who are dedicated to properties of an individual nature — be it a secluded self build, a property with eco credentials or a clever conversion.
Second/holiday home owners were once given a discount on their Council Tax bills in England (it was set at 50 percent of the standard rate at one time), but this has been eradicated and rates are set by the local authority, who may or may not provide a discount. Wales may be following suit soon.
For a ‘qualifying’ FHL, then you’ll likely be charged business rates (rather than Council Tax). These are calculated on a number of factors and may be more favourable than Council Tax.
The Island Self Build
Self build | Isle of Skye | build time: April 2011 – June 2013
‘White-Tail Croft’ let by: wildernesscottages.co.uk
As an architectural and interiors photographer, Nigel Rigden has spent a career capturing striking homes. So when the opportunity arose to create a holiday home on the Isle of Skye, nothing less than a self build project would do.
But what started out as a project to create a holiday home on the site of a derelict building, for himself and partner Elaine Mead, instead became a holiday let.
“We weren’t allowed to claim the VAT back. We’d been too honest on the VAT reclaim form and specified that we’d approached an agency regarding occasional letting,” explains Nigel. The assumption had been made that the couple were building primarily to run a business.
“It was a real blow. As soon as we’d received the news, that was it, we had to instead start thinking of it as a business first and a holiday home second,” explains Nigel. The income generated would allow the couple to recover some of the costs they’d lost out on. After exploring options for setting up their own website, the couple decided to opt instead for the holiday letting agency they’d first approached.
The couple installed a sauna as a luxurious added bonus
“Following conversations with a couple of people who had let out properties this way, we made our mind up: the agency have an established market, and with a name like ‘Wilderness Cottages’, people know what they’re getting,” Nigel says of the build, set within awe-inspiring island scenery.
“We had always treated this as a home and thought carefully about how we would use this space, and the layout — the two bedrooms, for example, are situated either side of the floorplan to provide privacy,” reflects Nigel. “We also bought high-quality items that we liked (we’d already bought a number of things before we got planning permission),” he laughs.
Opting for a contemporary, minimal interior scheme, with bursts of colour introduced through bespoke artwork and bold feature walls, has allowed the views captured by the large picture windows to do the talking. The couple’s approach seems to have paid off if reviews regarding the interiors – ‘beautifully appointed and equipped to an exceptional standard’ – are anything to go by.
Despite the change in circumstance, the couple now enjoy running the property as a let. “It’s good to put back a house which benefits the local community too,” adds Nigel of the Isle, where tourism provides a good number of jobs locally.
And his final words of wisdom? “In my experience, it’s either one or the other: your own holiday home or a holiday let, but with the advantage of being somewhere you get to use as well,” says Nigel. “Also, you realise just how many bed sheets you need!”
From Garage to Retreat
Interior Design: The interior co.
Shropshire | ‘Turtledove Hideaway’ let by: uniquehomestays.co.uk
Who’d have thought a former garage-cum-outbuilding would make a cosy couple’s retreat in the Shropshire countryside? What started out as a plan to convert a little-used, open-sided oak frame garage in the grounds of her home into a sheltered studio and space to display wares for her interiors company, has now become another business venture for designer Kerrie Griffin-Rogers.
“I needed extra space and a sense of separation between work and home,” she explains. “So my first idea was to add a roof to the structure to create a dry space beneath which to store items for the business,” says Kerrie, who undertook the roofing work on a DIY basis with a friend.
“It took us two weekends and we added all the battens and slate roof tiles ourselves. The only problem we encountered was when we got to the other side and realised that the battens were 3mm out, meaning we had to start again.”
But as the space swiftly developed, the realisation that this small but perfectly formed building could generate an income as a holiday let, dawned on Kerrie. Mixing high-spec buys with handcrafted items like the bathroom vanity unit, enabled Kerrie to complete the entire project for £10,000 (she’s even written a book on the subject, ‘From Shed to Chic’).
“There’s certain things you can save on when taking on a project like this, and areas where you really need to invest,” she advises.
Having not set out to create a holiday let, Kerrie had to apply retrospectively for Building Regulations approval and a ‘change of use’ from the local planning department. Fortunately she was granted both. “The Building Control officer first asked about the levels of insulation, but luckily I’d taken photographs at each and every stage of the project,” she says.
When it came to marketing the property, she approached Unique Home Stays. “You have to do very little (aside from the cleaning and the handover), and I’ve been booked solidly from December to Easter this year!” she says.“The little details really count too. If I’m making cakes, I’ll often leave some for the holiday makers, and I’m always at the end of the phone.”
Renovation Project | Near Padstow, Cornwall | Build Time: 2011 – 2012
‘The Stud’ let by: uniquehomestays.com
Investing in the fabric of a holiday home is one way of ensuring that heating bills do not remain an ongoing concern, particularly if you hope to let it out. This is exactly what Stephen Chidgey did — two decades after originally converting this centuries-old barn into a holiday let, he stripped back the property to create a high-spec, energy-efficient holiday home in Cornwall for the 21st-century guest.
Stephen originally purchased the derelict barn, which was for sale with outline planning permission in close proximity to his former home, some 26 years ago. He took on the conversion project himself, and following near-on three decades running it as a successful let, the barn required a little TLC.
“The roof was in need of replacement, so I decided to upgrade the entire property to futureproof against rising oil bills,” explains Stephen. “The three main priorities were to: introduce more natural light, create attractive spaces, and to make it much more energy efficient.”
With the existing oil-fired central heating and oil-fuelled range cooker – installed when the barn was converted in the ’80s – nearing the end of their useful life and with oil prices soaring, what followed was considerable research into renewable technology. Stephen consequently opted to mount two solar thermal panels on the south-facing gable end to cater for the hot water, with an electric immersion providing back-up — there’s no oil here at all now.
A ground-source heat pump, specified from British heat pump manufacturer Kensa, was installed beneath the front garden. The latter runs the underfloor heating throughout; the pipework for which Stephen installed himself.
“The low-level, radiant heat means there’s no longer cold spots within the barn; the heat is evenly spread,” he says. But more importantly, Stephen took the opportunity to upgrade the fabric of the building, exposing the occasional original stone wall internally and thoroughly insulating all other walls, ceilings and floors.
Opening up the vaulted ceilings, introducing rooflights and a new staircase (crafted in sustainable European oak) with glazed balustrade – allowing light to filter down to the dining space below – means the barn is now filled with natural light. The low-energy LED feature lighting scheme completes the sustainable picture. Indeed, the resulting interiors are a considered mix of ergonomics and good design.
“I love cooking, so I also invested in a bespoke, handmade kitchen which not only looks good, but is really functional for holiday makers.”