We remain bitterly disappointed by the proposed repeal of tax concessions relating to furnished holiday lettings, which looks likely to be enacted in this year’s Budget.
The NFU suggests members discuss the implications with their professional adviser as soon as possible, if they have not already done so.
We've again highlighted our concerns, at a recent meeting with HMRC and Treasury officials, and in a response to the further papers concerning furnished holiday letting published with the Pre-Budget Report on 9 December 2009. We believe the repeal would be damaging for those members involved in this diversification activity and is likely to have a wider impact for rural economies heavily reliant on tourism.
Rather than creating a level playing field, as suggested by HMRC, the move will put furnished holiday lettings businesses at a trading disadvantage with hotels and B&Bs. We've also highlighted the lack of certainty over the future tax treatment for those furnished holiday lettings owners who provide significant services alongside their lets and the potential administrative burden which repeal will cause.
The NFU beleives that an alternative to repeal, based on the existing legislation, should be implemented. A broadly revenue neutral compromise could be found which would require a higher number of weeks of letting. We also believe such a compromise would have the added advantage of increasing tourism in rural economies. However, to date HMRC and the Treasury have not accepted any proposals for a compromise and their preferred option of a repeal therefore looks to be likely to go ahead.
The NFU will continue to lobby for a workable alternative to the repeal, and in the event a repeal is enacted, will consider any opportunities for changing the legislation that are presented following the forthcoming general election.
If repeal does goes ahead in this year's Budget then HMRC will, in our opinion, need to amend the draft guidance issued on 9 December 2009 to give further clarification to owners.
In particular the section regarding when a furnished holiday lettings business will continue to be treated as a trade after 5 April 2010 needs further work and an example of when HMRC will accept that there is a trade needs to be included. HMRC also need to make it clear to taxpayers how they will in future distinguish between hotels/B&Bs (which they suggest will amount to a trade) and furnished holiday lettings businesses providing similar services (which they suggest will not).
Assuming that the repeal goes ahead, both income tax and capital gains tax advantages will cease to be available to many furnished holiday lettings owners with effect from 6 April 2010. Members with furnished holiday lettings should therefore consider the potential impact that repeal will have for them. It would be advisable to discuss the effect of repeal with a professional adviser as soon as possible and in particular whether or not there is any action needed before 5 April 2010.
No comments have been made.