David Cameron, Conservative party leader, and George Osborne, the Shadow Chancellor, have pledged to reverse a £20m tax raid on holiday homes proposed by the Treasury if they win the forthcoming election. The plans, which were announced in last year’s Budget by the Treasury, are set to bring in approximately £20m in taxes in the next year and are due to take effect next month.
Cynics might say that the deferred tax change implementation is sometimes used to reduce the outcry when such tax “increases” are announced. The plans will remove the existing tax breaks from furnished holiday lets and owners will then potentially be left with large tax bills.
Currently tax breaks are available to landlords who rent out furnished holiday accommodation which is made available for rent for at least 140 days per year and of those 140 days they were actually rented for at least 70 days.
Under previous rules, landlords have been treated as traders rather than investors, and as a result could offset the cost of furniture and fittings against earnings, but from next month they will be classified as investors and the tax breaks will be withdrawn. This could leave some second home owners facing large tax bills for their properties.
The Treasury have commented that these new rules will bring the UK in line with other European countries where they don’t have the same benefits and all property investors are treated equally.
According to the Tourism Alliance, the move by the Treasury also threatens 4,500 jobs within the holiday industry, mainly in the South West, Scotland, Wales and the North West. Research has suggested that it could cost the economy approximately £200m.
17 March 2010