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As a result, the Treasury has asked to meet with organisations and associations lobbying for the short-term lets sector, including the UK Short Term Accommodation Association [STAA] and the Professional Association of Self-Caterers UK [PASC UK], to discuss the impacts of the abolition of the FHL tax regime on the industry.
Previous Chancellor Jeremy Hunt announced in March that the former Conservative government would scrap tax relief for holiday lets as part of his Spring Budget 2024, in a bid to improve the availability of long-term rentals. In a speech, Hunt said that he had been “concerned” that the FHL tax regime had been creating a “distortion”, meaning that there are not enough properties for long-term rental by local people in their communities.
In addition, the Treasury and Office for Budget Responsibility [OBR] agreed on a reduction of the higher rate of property capital gains tax for residential properties from 28 per cent to 24 per cent to increase revenues and accelerate transactions in the UK.
The preferential tax regime for holiday lets, which includes income tax reliefs for costs incurred from furnishing properties [not available to the private rental sector] and the ability to reduce capital gains tax in certain circumstances, would be a nationwide measure across the UK.
The new Labour government has now announced that it will continue with the abolition of the FHL tax regime, despite the change of government last month.
In response to March’s announcement, figures from across the UK short-term rental industry associations warned of the impact that the incoming tax regime would have on holiday accommodation businesses.
While the STAA specifically warned that it would force the closure of “hundreds” of small businesses, PASC UK and The Association of Scotland’s Self-Caterers [ASSC], alongside their industry partners, led a collective call against the change and the impact it could have on the UK self-catering holiday industry, and the thousands of people it supports.
Andy Fenner, chief executive of the UK STAA, said: “The new government is bringing change to the UK taxation system. Change affects business and the people who work and use our businesses. I’m delighted to have been asked by HM Treasury to meet with them to discuss the draft bill to abolish the FHL tax regime and ensure STR tourism and the thousands of people who work in travel get the best deal possible from any change that’s coming.
“Travel and tourism is a vibrant growing industry. It suffered more than many during the pandemic, it needs support from the new government to reach its full potential.
“The STAA is leading the fight for our sector to make sure we get that support. We will work with stakeholders across government and industry and build the sustainable, responsible future for UK tourism,” he added.
Alistair Handyside, executive chair of PASC UK, said in a statement: “Late yesterday afternoon we received an email from HM Treasury announcing that they intend to carry on with the abolition of FHL allowances.
“PASC UK led one of largest ever sector pushbacks on this when it was first raised in the Spring Budget, ending up being the only sector association to meet in person with both the Treasury Minister and the Chancellor.
“Both committed to further meetings and to hold a sector consultation and the email confirms that this will be the case. So it’s all to play for. Previous to the election, we gathered and presented a vast amount of evidence to various government departments so are ready to go again on this.
“If the abolition goes through as proposed, the first casualties will be small self-catering business in coastal and rural areas. These form the bed stock of the fragile eco-system that makes up these visitor economies. You damage the bedstock, as WILL happen if this goes through, you will see pub, restaurants and visitor attractions closing too, as it’s the money that the guests who stay in our sector, and spend in these local business that far exceeds what locals spend.
“This policy does not align with the government’s stated ambition for growth, and we will be making that point loudly and clearly on behalf of the sector,” he added.
