Posted 15 April 2010 by Andrew Gardner
The changes to the tax treatment of furnished holiday lets scheduled to have been implemented at the start of this new tax year have been put on hold, or could it be a "u" turn?
The favourable tax breaks of a holiday let over a conventional buy to let arrangement were due to be removed on 6th April. Such a move is considered to be extremely detrimental to the long term future of the self catering tourism industry in the UK and in particular encouraging new owners into this valuable sector.
The Conservatives have vowed not to implement these changes should they be elected on May 6 and I understand as part of the deal to push Alistair Darling's budget through they insisted on these plans not being put in place prior to the election.
A furnished holiday let is treated as a business rather than an investment which gives it certain tax advantages over a conventional buy to let arrangement. The criteria to qualify is quite strict however the benefits are tangible. A major advantage is the ability to offset any losses against income from other sources which could be a salary from a main source of employment. In the first couple of years of set up or following an upgrade to the property a loss could be a reality. In addition the capital gains tax requirements on disposal are better and also income derived from a holiday let business is pensionable.
That might seem only a small point, but if your holiday let is your eventual pension pot why not also make pension contributions against it? That is then very tax efficient.
So where are we at the moment?, Well, as we were, but a word of warning if Labour wins the election the rules could change as they should have done. If the Conservatives win we are assured these valuable tax breaks remain.
If you are part of this industry and your income depends on it, maybe that focusses your mind on which party would serve you better..