Budget comment - Furnished Holiday Lettings repeal will not be implemented

Budget comment - Furnished Holiday Lettings repeal will not be implemented

Tue 22 June 2010

Common sense prevails to breathe hope into the future of the self-catering holiday home letting industry

Statement from Kate Stinchcombe-Gillies, spokesperson for holidaylettings.co.uk, on the news from today’s Budget that furnished holiday lettings tax reliefs continue to apply to trading holiday homes and a full consultation of the reliefs will take place over the summer to make the rules ‘fiscally responsible’ and in line with EU law.

To speak to Kate, please call 01865 312010

As hoped, the first Con-Lib Budget has rejected Labour’s earlier proposed withdrawal of furnished holiday lettings tax reliefs and Labour’s plans will not be implemented. Instead, the Government has called for a consultation of the current rules over the summer to ensure that the rules are both in line with EU law and are ‘fiscally responsible’ for the future of the economy. They propose to achieve these goals by changing the eligibility thresholds and restricting the use of loss relief, and to apply these changes at the start of the 2011/12 tax year next April.

Who benefits most?
Those who earn a livelihood from holiday lettings, because under the current rules they can:
- Offset losses incurred from running/maintaining their holiday home
against other personal income (particularly valuable in the first few years and to incentivise entry in to the marketplace)
- Contribute to a personal pension from the income earned from the holiday lettings
- Benefit from two options on CGT when selling the home:
1. Rollover relief, providing they buy another holiday let within three years
2. Entrepreneur’s Relief, capped at just 10 per cent

These rules have previously served to encourage second home owners to make greater use of their holiday properties, rather than have them sit empty. In turn UK tourism and local economies are better supported.

Likely changes: pre-election, the Conservatives fiercely opposed Labour’s attempted repeal of these rules and leaned toward the proposals set forth by the Tourism Alliance to adjust the eligibility criteria in order to make the rules more fiscally reasonable. It looks like part of their summer consultation will further consider these ideas to increase eligibility to mean that the home must be let for 15-20 weeks of the year, rather than just ten.

In raising the eligibility criteria, the Government will ensure it protects those whose livelihood is based on trading in this industry as well as demonstrating its support for tourism. It may also encourage those more part-time holiday let landlords to make their homes available for more weeks of the year, further supporting local economies and evening out the supply/demand factors seen in popular holiday resorts during peak season.

The number of second home owners letting out their properties to paying guests has grown enormously in the last five years as more and more realise the value added asset hidden in their holiday home. 10,000 new homes were added to holidaylettings.co.uk in 2009 and similar growth is expected in 2010. Today’s news comes at a time when demand for holiday home accommodation, both in the UK and EEA, is still soaring. Booking enquiries sent through holidaylettings.co.uk year to date are up 25 per cent.

Of the 40,000+ holiday homes currently advertised on Holiday Lettings, circa 18 per cent are in the UK and a further 65 per cent are in the EEA. These figures demonstrate the potential extra weight on the exchequer when the rules are extended to British second home owners of overseas holiday homes. However, realignment of the eligibility criteria should reduce the impact and favour those most likely to be earning a livelihood from holiday lettings.

Notes to Editors
Current eligibility for allowances: holiday home must be available for 140 days and let for 70 (10 weeks). The owners who let their home for fewer weeks (and only partially cover their costs) are essential in maintaining a healthy supply and demand balance over peak holiday periods (and hence keeping the price of peak week holidays down), so that families with school age children can afford their summer breaks in part because of these occasional landlords helping the supply and demand balance.

Ends

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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Contact the PR team:
Kate Stinchcombe-Gillies, head of communications
+44 (0)1865 312010

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