STEP reports that the government has agreed to remove from the Finance Bill its proposed abolition of tax relief on holiday lettings. But the measure will be revived after the election if a Labour government is returned
Read the full article at the STEP Journal or read the extract below.
“The measure was announced last October and scheduled for the 2010-11 Budget. It duly appeared in the first draft of the Finance Bill as Clause 65 and Schedule 21, stating that letting furnished holiday accommodation would no longer be treated as a trade for certain tax allowance purposes, for example so-called sideways relief.
The Conservatives estimate that the change would affect more than 120,000 businesses, costing the owners an average of GBP4,000 each a year. It would raise GBP25 million in 2011/12 and GBP15 million in 2012/13.
But a general election has now been called and the Finance Bill has to be forced through within two days. This gave opposition politicians the chance to demand concessions from Chief Secretary to the Treasury Liam Byrne. They chose three – the holiday lettings tax, the “cider tax” and the “broadband tax”.
According to The Times, both George Osborne (Conservative shadow Chancellor) and Jeremy Browne (Liberal Democrat Shadow Chief Secretary to the Treasury) claimed credit for the government’s retreat.
Both opposition parties have attacked the measure in the Commons, agreeing with many business associations that it could damage the British tourism industry.
The abolition of holiday let relief was originally triggered by a European Commission ruling that the UK government could not apply it only to homes in Britain; it had to apply to homes anywhere in Europe, or none at all.
The government decided to accommodate this by making the relief apply to all homes during 2008-10, and then abolishing it altogether from April 2010.
Financial Secretary to the Treasury Stephen Timms said that, if the measure doesn’t go ahead, the Treasury will have to pay tax relief to everyone with a holiday home within the EU.
So owners of holiday lets in European Union member states now have an extra window of opportunity to claim tax relief. The election result will determine how long the window remains open.”