Furnished Holiday Lettings

The Furnished Holiday Lettings rules currently allow owners of qualifying properties to treat their properties as trading businesses for tax purposes. This means that they qualify for loss relief, capital allowances and certain capital gains reliefs.

The rules enable self-catering operators and some other providers to finance improvement works to their properties and ensure that necessary upgrades and replacements are made.

The Proposed Repeal 

In the Budget of March 2009 the then Chancellor of the Exchequer, Alistair Darling announced that the FHL rules were to be repealed in order to make British tax rules compliant with European Union regulations. Tourism South East joined other bodies across the tourism and small business sectors in opposing this move. All of the available evidence proved that the repeal would have had a very detrimental effect on the self-catering sector which is so vital to many rural and coastal economies.

Industry Lobbying 

Following concerted lobbying efforts by Tourism South East and our industry partners the plans to repeal the FHL rules were scrapped after Parliament withdrew the necessary provisions in the Finance Bill in March 2010. However it was also announced that a review would need to take place in to how the rules could be amended to comply with the relevant EU law.

Treasury Consultation

 In his first Budget following the General Election the new Chancellor, George Osborne announced that the FHL rules would not be repealed but that the review launched by his predecessor would need to go ahead. As a consequence the Treasury has proposed to make amendments to the rules that would ensure that only genuinely commercial operations would be able to qualify as opposed to second home owners exploiting the rules. The changes that the Treasury has proposed are:

 To make furnished holiday lettings in both the UK and the European Economic Area eligible;

• To extend the minimum period over which a qualifying property must be available for letting to the public from 140 days to 210 days in a year;
• To extend the minimum period over which a qualifying property is actually let from 70 days to 105 days in a year; and
• To restrict the use of losses so that they can only be set against income from the same furnished holiday lettings business.

A consultation has taken place on these proposals and Tourism South East has submitted comments arguing for a number of clauses to be included that would ensure that self-catering operators are treated fairly when the FHL rules are amended.

The results of the consultation and the Government’s response will be published by the end of this year and any agreed changes will be implemented in the 2011 Budget. Tourism South East will ensure that our members are kept up to date with all developments.

Tourism South East's Submission

Tourism South East's submission to the Treasury's consultation on behalf of our members can be downloaded here.