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Six months to self-catering tax deadline
Story published: Friday, 16 October 2009
Owners of self-catering accommodation have six months to prepare for changes to the Furnished Holiday Letting (FHL) rules or face the prospect of higher tax liabilities next year.
Changes in this year’s Budget, due to come into effect from next April, will mean owners who provide self-catering accommodation, run as their primary business interest, will lose tax relief and capital allowances that were previously available to them.
Failure to take appropriate advice on the rule changes and how they will impact on holiday businesses could leave owners with higher tax bills in 2010.
What does this mean for self-catering accommodation providers?
The FHL rules currently allow owners of self-catering businesses in the U.K., providing they satisfy certain tests, to be treated as trading businesses for tax purposes. However, as UK owners of similar properties elsewhere in the EU cannot qualify for this treatment, the Government decided that the FHL rules may not be compliant with European law and, as part of its 2009 Budget, announced they would be revoked from April 2010. The main fiscal consequences of the rule changes are:
1) Losses from FHLs would not be able to be set against other income (e.g. other trading or employment income).
2) Capital allowances would not be available.
3) Income from FHL would no longer be ‘relevant earnings’ for pension purposes (which could affect those who have no other trading or employment income)
4) The sale of the FHL business would no longer be eligible for the following capital gains tax reliefs:
a. Entrepreneurs relief (which reduces the taxable gains on the sale of a business)
b. Roll-over relief (which allows gains arising on the sale of business assets to be deferred if the proceeds of sale are reinvested into other business assets)
c. Specific hold-over relief for business assets (which allows the accrued gains arising on a lifetime gift of property to another individual to be deferred and assumed by the donee).
What is Welcome to Yorkshire doing to support the Yorkshire self-catering sector?
Welcome to Yorkshire fully supports the Tourism Alliance in its quest to overturn the rule changes, however, we have no guarantees that our objection will be successful, which is why we are urging accommodation providers to seek advice and take appropriate action regarding their circumstances before the deadline expires.
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