There has not been much good news around lately and just when owners of UK holiday home owners thought things were improving (after seeing strong bookings as a result of more families opting to stay at home and have a holiday) along comes the government with some proposed changes which will alter the much valued tax breaks for holiday let owners.
In April of this year, many tax breaks could disappear as the UK falls in to line with European law. Up until now furnished holiday lets, have been recognised as an official trade in parts of the UK tax system, meaning owners could claim allowances for some costs with regard to running’ the business” Many holiday let proprietors fear that without these valuable tax breaks, running this type of business may no longer be viable. The chancellor plans to repeal the Furnished Holiday Lettings rules which may have serious consequences in may rural & coastal areas. These are parts of the United Kingdom that most rely on tourism as an industry, in these areas, jobs are vital, local economies, are dependent to a certain extent on the holiday industry and the influx and visitors spending money. It is feared that if owners cannot operate on a profitable basis, they may simply decide to discontinue renting property, which will in most cases, lead to the sale of the property.
Running a holiday home rental business, is seen by many as no different from any other business, certain expenses are incurred and these include, keeping the property in good condition, cleaning it after each renter has left and providing basic disposable items consequent with renting a property on a short term basis. Many owners are angry that something they consider is no different from many other business, is to be considered as an investment and taxed differently. The more cynical suggest that changing the rules on furnished holiday is simply yet another ‘stealth tax’.
The Treasury hopes to raise an extra £20million a year by abolishing tax breaks for ‘second home owners”, it also claims that there are other tax breaks available to proprietors of these establishments but it must fall in line and comply with European law. In essence, the changes are being introduced to stop second home owners gaining tax benefits by letting their properties for a short period of time. However, this seems to be having a detrimental impact on persons that have genuinely purchased additional property to run as a business. There is a difference between the two scenarios, but it is thought that it will be difficult to police without the employment of staff to actually check on what a proposed property is being used, local authorities, simply do not have the resources to carry out the checks. for. It is understandable why holiday property owners are angry. Many have invested a good deal of time and money in building up their business, only to find that the government have changed the rules, leaving them in a situation where their incomes are compromised. Perhaps it is time that owners of what is in effect business property, grouped together to try to come up with a solution to what may have severe ramifications not just for the business owners themselves but for local economies.
At Assetsure you can find out more about holiday home insurance and understand some basic holiday home investment tips.