Holiday Cottage Industry in Crisis
Owners of Self Catering Properties Will Lose Tax Relief After Budget
May 1, 2009
At the beginning of a holiday season which looks bleak for the British Tourist industry, one sector has received a body blow which threatens to decimate it. Tucked away on page 111 of the budget 2009 report: 'Budget 2009 Building Britain's Future', (Crown Copyright), are a couple of lines of text which could have severe implications for the self catering holiday business in the UK.
'Budget 2009 announces the repeal of the Furnished Holiday Lettings (FHL) rules from April 2010. Until the repeal takes effect, the FHL rules will be extended to those with qualifying furnished holiday lettings elsewhere in the European Economic Area.'
Furnished Holiday Lettings Rules
Under current rules, properties which are let as holiday cottages, or self catering properties, and which meet a number of criteria gain from a beneficial tax regime under the Furnished Holiday Lettings rules.
For a property to come under these rules, it must be:
- In the UK;
- Available for rent to the public for 140 days per year;
- Be let to the public for at least 70 days in a tax year;
- Individual lets must be less than 31 days in length.
FHL Rules Extended to Cover EU Properties Until 2010
As the FHL rules only covered UK properties, HMRC had concerns that the policy did not comply with European edicts and therefore extended the relief to cover all qualifying properties within the European Economic Area. This relief, however, will only be given until April 2010, when the rules will be abolished for all owners.
The tax reliefs which have been withdrawn include:
- The ability to claim loss relief as a trade;
- Capital gains tax level of 10% on the sale of property as a trade asset;
- Holiday let properties exempt from inheritance tax;
- Inclusion of property let income into pension contribution calculations.
In an interview with Suite101, Tayler, Chairman of the Welsh Association of Self Catering Operators, (WASCO) commented, "The holiday letting trade runs on very low margins and the withdrawal of tax relief will damage many of our member’s businesses at a time when tourism spending is reduced because of the economic climate. What is most worrying is that despite such huge changes, that have such wide ranging effects on our industry, HMRC are vague on the details, and cannot provide clarification as to the implications for several weeks yet."
There appears to have been no consultation on the part of the government with Tourist Boards in the UK, with the self catering trade or even with the Welsh Assembly Government. The question as to how and why such a sweeping change can be introduced without detailed discussion with the stakeholders must be asked.
Given the impact of these changes in businesses which are widely located in areas of low employment which is reliant on tourism to bring in jobs and revenue, it is hoped that consultation will take place between the government and representatives of the trade in the very near future.
