U-turn on scrappage of holiday home tax reliefs

U-turn on scrappage of holiday home tax reliefs

Thurs 8 April 2010

Just as the furnished holiday lettings tax reliefs were scrapped (6th April), the Conservatives may have prevented this change making it to Statute at all. In the Government's race to finalise the Finance Act ahead of parliament dissolving before the election, shadow Chancellor George Osbourne fought the corner for British tourism and the self-catering industry, refusing to endorse the repeal of tax reliefs for holiday home owners and forcing the Government to retract the change, at least until the outcome of the election.

Ross Elder, managing director of holidaylettings.co.uk, comments:

• This is potentially an extraordinary reprieve for self-catering tourism, local economies and British holiday home owners who earn their livelihoods from running holiday home letting businesses
• We whole heartedly support this action and what it means for the future of the holiday lettings industry and the livelihoods of many second home owners
• But, the Conservatives must win the election in order for this amnesty to stand It is likely that the Conservatives will need to adjust the rules in order to achieve a fiscally neutral situation while still rewarding those trading in holiday lettings, complying with EU law and restoring public finances
• To achieve this the Conservatives may consider the revised eligibility criteria proposed by the Tourism Alliance: increase the minimum period the property is let from 10 weeks a year to 15 or 20 weeks

What could this mean?

Broadening the eligibility criteria for the tax reliefs would have three positive impacts:
1.Assist and encourage “livelihood” holiday home landlords, i.e. those who are already trading in holiday lettings 20+ weeks a year. It will enable them to still contribute their income from their holiday home business to their pension; benefit from capital gains rollover relief if they need to relocate; and offset any losses from maintaining the holiday home against other personal income
2. Encourage "occasional" holiday home landlords to increase the number of weeks they let their home to paying guests in order to benefit from the reliefs. This will in turn increase self-catering capacity and spend, reduce costs for paying guests during peak periods, and bring more money into local economies as well as the broader tourism economy
3. Incentivise new entrants to the holiday home marketplace. New purchasers of second homes will still be able to offset losses from furnishing the home and covering advertising costs, which are generally higher in the first year of business

Ross Elder, managing director of holidaylettings.co.uk, says:

'This is a clear vote winner for the Conservatives if they can define how they will manage furnished holiday lettings for tax purposes in the future and this needs to include how they will incorporate British owners of holiday homes in the EEA. If they use this as one of their campaign leads it could also help raise further awareness of the matter amongst holiday home owners, many of whom are still in the dark following Labour's 'cloak and dagger' approach to introducing the changes, despite campaigns by Holiday Lettings, Visit Britain and The Tourism Alliance disputing the matter.

'The Tourism Alliance has done some fantastic work to highlight the size of the holiday lettings industry in the UK and the impact of Labour's attempted repeal, and as such has created a set of guidelines for an on-side government to act upon. To encourage and reward the holiday lettings industry, which is so entrepreneurial in nature, will have long term economic benefits both locally and nationally, especially in the arenas of tourism and hospitality.'

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About Holiday Lettings:

Holidaylettings.co.uk was established in 1999 by Ross Elder and Andy Firth. Part of the TripAdvisor Media group since June 2010, the business continues to thrive as an independent brand from its offices in Oxford. Jonathan Dees has been managing director since March 2011.

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