June Budget 2010: Furnished Holiday Lettings rules saved
June Budget 2010: Furnished Holiday Lettings rules saved
Holiday home owners will today (22 June) be celebrating the announcement made earlier by the Chancellor of the Exchequer, George Osborne, in his Budget statement that the favourable tax rules for Furnished Holiday Lettings (FHL) will continue under the coalition Government.
The Chancellor said: “There are many small businesses in the tourism industry today. To help them, I am reinstating the favourable tax rules for Furnished Holiday Lettings, which our predecessors had planned to repeal.”
But in order to ensure that the special tax rules are both in line with EU law and are ‘fiscally responsible’ for the future of the economy, the Government has called for a consultation of the current rules. The Government proposes 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.
FHLs enjoy a number of tax advantages over buy to lets. This is because, essentially, they are treated as a trade and, as such, benefit from reliefs generally available to trades, such as the ability to offset losses against other income, entitlement to capital allowances and Capital Gains Tax reliefs.
To qualify, the property must be in the UK and be available for holiday letting on a commercial basis for at least 140 days in the tax year; actually be let for at least 70 days; and individual lets should not exceed 31 days and the holiday home must not be let to the same person for more than 31 days in the year.
The Tourism Alliance and Holiday Lettings, among others, had previously warned that ending tax relief on holiday homes would have serious and harmful consequences for the domestic tourism sector – potentially leading to a loss of more than £200 million and 4,500 jobs.
The Tourism Alliance had lobbied the Conservatives pre-election – arguing that holiday lets have more in common with hotels and bed and breakfasts, which are normally regarded as trading businesses, than they do with residential properties which are ordinarily regarded as investments.
The rules governing FHLs were due to be withdrawn from 6 April 2010. However, the timing of the election, and the limited time in which to rush the Finance Act 2010 through Parliament, granted FHLs a reprieve as the proposed changes were not implemented. Holiday home owners and the tourist industry in general were waiting with baited breath to see what today’s Budget would bring.
This story is brought to you by holidaylettings.co.uk
22 June 2010
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