Call for u-turn on FHL change

The UK's tourism industry 'faces turmoil' as a result of tax changes in last week's Budget, PKF has claimed.

The accountancy firm has called on the Treasury to quickly rethink its decision to repeal rules relating to furnished holiday lets (FHLs), which from 6 April 2010 will be treated for tax purposes as any other let property.

The new policy was instigated on the pretext that FHLs in the UK may not comply with EU law by being treated as trading income for their owners and operators - as they have been since 1983-84. Therefore the rules are to be extended to include furnished holiday lettings in the European economic area for 20060-07 to 2009-10 before the special treatment is abolished.
 
PKF tax partner Peter Harrup said that it was no surprise that the tax break has been removed given the country's current financial difficulties - but he criticised the move for denying owners of larger holiday letting concerns 'reliefs available to other businesses at a time when they are very much needed'.

Mr Harrup added: 'While it is only fair that UK owners letting property in Europe can now qualify for this tax treatment, it does not mean that it is sensible to withdraw tax breaks from all UK holiday lettings.'
 
Owners of FHLs in the UK and elsewhere in Europe who wish to benefit from the current rules on capital gains will have to sell their properties by 5 April next year.
 
'Thousands of people – from those owning one chalet to individuals running large holiday businesses – now face some tricky long term decisions at a time when they should be concentrating on preparing for the holiday season, and I fear that many owners will try to sell quickly,' said Mr Harrup.

'If this leads to a reduction in the number of tourists visiting UK holiday areas, it will hurt the wider UK tourist industry: one of the few sectors of the economy that had looked set to avoid the recession.
 
'The Government needs to rethink this policy quickly to avoid causing collateral damage to the UK tourist industry.'

Categories: News , Budget 2009 , Capital Gains