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The Government has been forced to drop the controversial change to the tax treatment of furnished holiday lettings, following pressure from opposition MPs.
The alteration of the Finance Bill came after the Conservatives threatened to delay the progress of other legislation, including the contentious Digital Economy Bill, if three planned tax changes were not withdrawn.
An unpopular 10% rise in the price of cider and a long-mooted 50p-a-week broadband levy have also been sidelined, as ministers aim to introduce Finance Act 2010 before the dissolution of Parliament on 12 April.
In a move to better comply with EU law, the Treasury announced in the 2009 Budget that it would repeal the rules relating to furnished holiday lettings (FHLs) in the European Economic Area, with effect from April 2010, meaning profits from FHLs would be treated as those from any other let property rather than as earned income.
The reversal of the measure was hailed as ‘excellent news’ by business tax expert Kevin Slevin, who said it was no surprise given that the Tories had pledged to drop the legislative change if they were elected.
‘People who trade in furnished holiday lettings were particularly incensed about the impact on pension planning,’ said Mr Slevin, who added a note of caution that the change to FHL treatment would be reinstated should Labour be re-elected on 6 May.
He also remarked that it was ‘good news for small businesses’ that the doubling of entrepreneurs’ relief to £2 million – announced in last month’s Budget – had not been affected by the Finance Bill wrangling between the main political parties.
