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Tax Changes To Hit County's Holiday Home Industry

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Tax changes to hit county's holiday home industry

Tax law changes for owners of holiday homes could result in tough times ahead for the tourism industry.

A repeal of the furnished holiday lettings rules next year could result in many people deciding to stop renting out their properties because they will have to pay more tax.

National figures provided by the Tourism Alliance suggest that if only 10 per cent of providers give up their business, the nationwide decrease in revenue to seaside and rural areas would be £200 million and 4,500 jobs.

Laura Sandys – Conservative Parliamentary candidate for South Thanet and Sandwich – said she was concerned about the impact the changes could have on Kent.

She said: “These holiday lettings play a vital role in our summer tourism sector, both on our coast and in our villages where there is little other family accommodation.

“Without a wide range of holiday lettings we might not be able to accommodate families who cannot afford to stay for a week in a hotel.

“This could be highly detrimental to our shops, bars and restaurants that gain significant trade from these longer-term visitors.

“This is yet another blow to tourism when we are all working so hard to rebuild the British family holiday.â€

The current lettings rules allow properties being let as holiday accommodation for at least 140 days a year to be treated as a commercial business for tax purposes.

This means owners are able to claim loss relief, capital allowances and relief for certain capital gains.

However, the new rules will result in holiday lettings being treated as investment income rather than business income, and will therefore incur a higher rate of tax for owners.

Sarah Cheeseman, 43, from Waltham-on-Thames in Surrey, owns a large five-bedroom holiday home in Romney Marsh but says she may reduce its availability and increase its rental price as a result of the tax changes.

She said: “It used to be worthwhile pumping lots of money back into improving the property and getting as many lettings as we can, but it won’t be any more when our profits are being taxed so much.

“The wear and tear of the house will not be offset like it is at the moment.

“It’s quite possible that a lot of people will stop letting out their holiday homes now, or they will only do it so they can cover their costs and keep it for themselves to stay at in the summer.

“The new rules make owning a holiday home a much less attractive prospect and I wouldn’t have thought it was a good thing for the tourism industry.â€

Visitor information centres and attractions across the county recorded an increase in footfall in June last year compared to the same time in 2007, and in most cases between 60 per cent and 90 per cent were domestic visitors.

The statistics were provided by the not-for-profit group Visit Kent, which is expecting another strong summer this year as the recession convinces holidaymakers to save money by staying in the UK.

Head of tourism Fran Warrington said the tax rule changes had come at a bad time.

She said: “We are in the business of trying to encourage this sort of accommodation, so anything that makes it less worthwhile for owners is not to be supported and we will certainly be doing our best to make our feelings known.

“The demand for self-catering holidays has gone up and we feel there is an opportunity to provide more accommodation like this in Kent, not less.â€

Why is this an issue? You earn from letting your holiday home, therefore you pay tax on it, just like any other capital investment.

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"However, the new rules will result in holiday lettings being treated as investment income rather than business income, and will therefore incur a higher rate of tax for owners"

Why is this an issue? You earn from letting your holiday home, therefore you pay tax on it, just like any other capital investment.

I think the reason was explained.

But personally I don't believe it will make a difference.

I can't see how trying to avoid paying higher tax by not renting out your property and thus receiving no income at all, is a sensible course of action for an owner.

tim

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I think the reason was explained.

But personally I don't believe it will make a difference.

I can't see how trying to avoid paying higher tax by not renting out your property and thus receiving no income at all, is a sensible course of action for an owner.

tim

:lol::lol::lol: Yes but some people can't add up.

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I think the reason was explained.

But personally I don't believe it will make a difference.

I can't see how trying to avoid paying higher tax by not renting out your property and thus receiving no income at all, is a sensible course of action for an owner.

tim

There is the time spent on letting it out, cleaning it up, maintaining it and then faffing around with tax returns and other official stuff. If there is already only a slim margin of profit and the tax takes up most of that, then yes, it's not not worth someone's while to mess around with a holiday let. Would you bother working for less than minimum wage an hour?

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It was tax loophole and it's being closed. Only really affects second home owners who only let out the property for short spell to offset against tax.

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This tax system was not a loophole, but a policy to allow owners of holiday properties to offset losses in any year against other income. It is strange how some people here seem to have a problem with any business that utilises properties.

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There is the time spent on letting it out, cleaning it up, maintaining it and then faffing around with tax returns and other official stuff. If there is already only a slim margin of profit and the tax takes up most of that, then yes, it's not not worth someone's while to mess around with a holiday let. Would you bother working for less than minimum wage an hour?

Most people with holiday homes (that they let out) employ a "key" person to arrange this for them. This cost is still going to be deductable

tim

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The EU Holiday Home Debacle

In the months leading up to the Budget, a number of tax cases had been heard in Europe that had required the UK to change its own internal tax laws in order to be EU compliant. Two specific cases concerned the inheritance tax reliefs of Agricultural Property Relief and Woodlands relief. Both reliefs statutorily applied only to the UK/ UK and its islands, and both were held to be contrary to the EU aim of ensuring free movement across the European Economic Area (EEA).

Having seen the writing on the wall as far as FHL [Furnished Holiday Lettings] were concerned, the Government decided to change the law as it applies to FHL as a pre-emptive measure. However, the result is far from what could have been anticipated.

With effect from Budget Day (22 April 2009), properties meeting all other requirements will qualify as FHL if they are situated anywhere in the EEA. So far so good. However, the beneficial FHL rules will then be repealed in their entirety for all properties, UK or EEA, with effect from 6 April 2010. Sledgehammer to crack a nut anyone?

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I think the reason was explained.

But personally I don't believe it will make a difference.

I can't see how trying to avoid paying higher tax by not renting out your property and thus receiving no income at all, is a sensible course of action for an owner.

tim

You offset your mortgage interest against your income and so get 40% relief. Cheap mortgage.

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Having seen the writing on the wall as far as FHL [Furnished Holiday Lettings] were concerned, the Government decided to change the law as it applies to FHL as a pre-emptive measure. However, the result is far from what could have been anticipated.

Nope. I think it's exactly what would have been anticipated.

If anyone goes to court hoping to get a tax relief, not intended for then, extend to cover their situation, given the current government's desire to raise taxes it's an odds on certainty that the relief will be removed for everyone rather than extended to the complainer.

tim

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