Holiday cottage tax blow

Owners of fully furnished holiday lets-and those who want to stay in them could be dealt a blow on April 6 when the rule that governs the way they're taxed is repealed. This will change the status of furnished holiday lets from trading businesses to property investment businesses similar to buy-to-let properties, and has come about because previous legislation was contrary to EU stipulations on consistent taxation for citizens of member states regardless of where their business is located.

‘The loss of tax relief will particularly dissuade new businesses, who will no longer be able to offset their capital expenditure against other income, meaning it will take longer for the let to become profitable,' explains Kurt Janson, policy director of the Tourism Alliance (TA), which has been at the forefront of the campaign to see the legislation altered.

However, hope has been offered by the Conservatives, who have pledged to repeal the decision. Shadow Chancellor George Osborne told a tourism press conference in Blackpool recently: ‘I can announce that a Conservative government will take action to undo the damage caused by the abolition of the Furnished Holiday Lets reliefs in a way that is fiscally neutral, and consistent with our commitment to cutting the deficit and restoring the public finances to health.'

Some 120,000 businesses and 4,500 jobs could be affected, with the TA estimating that the net cost to the UK economy could be £200 million. The repeal would be yet another blow for owners of historic houses, many of whom see holiday lets as a form of extra income and who are already struggling under legislation that sees no tax relief for repairs and maintenance, despite such buildings generating £1.6 billion for the economy each year (Town & Country, January 27).