Consultation response - February 2010

In the 2009 Budget ‘Red Book’ HM Treasury announced its intention to abolish a tax concession available to large parts of the holiday self-catering industry known as Furnished Holiday Lettings Relief.

This concession allows owners of self-catering properties in the UK, who meet stringent criteria to be treated as trading businesses for tax purposes. HMRC published draft legislation and guidance notes in December 2009, and invited comments on their likely impact by 26 February 2010

VisitBritain has been working with many in the private and public sector to ensure that the impact of these proposals are fully understood by Government. Our response to this consultation can be downloaded.

In summary we outline our concerns that the proposals fails to understand the nature of modern self-catering,  arguing that refusal to designate the operation of such businesses (despite the many services offered by owners) as a trade will damage not only the viability of self-catering businesses, but that of the accommodation sector as a whole. The withdrawal of reliefs will act as a barrier to investment, and reduce the competitiveness of UK tourism.

We have proposed changes to the eligibility criteria, which should reward successful businesses, set a challenging threshold for ‘hobby landlords’ who use the reliefs as a subsidy to their personal second homes, and exclude many landlords of overseas property where the letting season is very short. We believe this proposal should be tax neutral, and have called upon the government to introduce the proposed new regime for a trial period, to allow this proposition to be properly tested.

Update on FHL - April 2010

At the end of April, the Government agreed not to proceed with abolishing Furnished Holiday Lettings Relief. We were advised that the only matters that could be stated with certainty was that the proposed repeal of the relief would not form part of the Finance Bill, and that it would be open for the government in the post-election parliament to revisit the issue. At present, the relief remains in place for qualifying owners on the original terms.