Tax Blow for Holiday Home Owners

Thousands of UK holiday-home owners face losing a range of tax benefits under changes announced in last April’s Budget. From April 2010, holiday property landlords will no longer be able to write off "trading" losses from second homes against their tax bill. Capital allowances and capital gains benefits will also go.

Currently a home qualifies as a holiday property if it is furnished, being run as a commercial business and available for rent to the public for at least 140 days per year. It must also be let for at least 70 days a year to attract the tax benefits.

Thought to be worth around £4,000 a year to each business these tax-breaks have been in place since the 1980s, and are intended to encourage landlords to provide holiday homes and boost tourism. Many holiday-home owners planned their businesses on existing tax rules, and to see these changed at relatively short notice may result in many withdrawing from the holiday let market.

Guess who’s behind the changes. It’s Brussels at it again! Basically, the tax-breaks only apply to second homes in the UK. So any Briton owning a holiday home elsewhere in the EU, could not take advantage of them. The eurocrats having failed to straighten our bananas or ban British sausages, deemed this unfair and illegal. To extend the tax-breaks to everyone with a holiday home on the Continent makes little economic or moral sense, and when the Treasury ruled the estimated £15 million cost unaffordable, the Chancellor had no choice but to abolish the tax-breaks altogether. As a rule I try not to feel sorry for Alistair Darling, but in this case, he really was between a rock and a hard place - thanks to a one-size-fits-all EU directive which lays down a rigid law that must apply throughout the European Union.

Apparently UK Tourism ministers and other industry representatives were not consulted about the proposed changes in advance - but are now slowly waking up to the possible catastrophic affect on tourism. The Welsh Assembly Government, for example has written to the Financial Secretary to the Treasury Stephen Timms, requesting a review of the repeal. Explaining that in some regions of Wales 27.12% of holiday visitors in 2007 stayed in self-catering accommodation.

Janet Anderson M.P. has submitted an Early Day Motion to Parliament signed by 64 M.P.s including Charles Kennedy.

Early Day Motion 1730 states :-

That this House notes that the repeal of Furnished Holiday Lettings rules announced in the Budget will have negative and unintended consequences for providers of holiday lettings; believes that the negative impact of the repeal will lead to a reduction in the supply of self-catering accommodation in particular, resulting in a significant loss of jobs and damage to rural and seaside economies; further notes with concern the lack of any industry consultation on the repeal; and calls upon the Government to conduct a full consultation and review of this policy change as soon as possible to ensure all affected parties have the opportunity to voice their concerns and to promote an understanding of and mitigate against any unintended consequences on tourism, especially in rural and seaside areas.

The information contained above is provided for information purposes only, to inform you about developments which may be of interest. It should not be taken as authoritative or comprehensive view of the material concerned and does not constitute legal advice. Lyon Insurance Services Ltd does not accept liability for any loss or damage arising from the use of or reliance upon any information contained within this newsletter. Please seek appropriate legal or professional advice in relation to how the material may affect you.