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UK: Short-term rental industry associations and lobbyists have convened with HM Treasury officials in London to address the proposed changes to the Furnished Holiday Lettings [FHL] tax regime allowances.
Representatives from the UK Short Term Accommodation Association [STAA], the Professional Association of Self-Caterers UK [PASC UK] and the Association of Scotland’s Self-Caterers [ASSC] recently met with Treasury officials to advocate for the industry and ensure that the voices of their members were heard amidst the FHL proposals.
Earlier this month, the UK government announced that, despite the change in government in July, it would follow through with plans to abolish the FHL tax regime from April next year, removing the tax advantages that landlords who offer short-term holiday lets have over those who provide standard residential properties.
As listed on the Gov.uk website, the government has published draft legislation to abolish the FHL tax regime, which includes a tax information and impact note [TIIN], draft legislation, and an explanatory note providing a more detailed guide to the legislation.
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.
Alongside key industry players including Travel Chapter and Sykes Holiday Cottages, the STAA met the Treasury team last week. In an update posted on LinkedIn this week, the association wrote: “Our focus in this process is clear: to protect the livelihoods of our members and ensure that the Treasury understands the real impact these changes will have on the sector. We’re not just pushing back; we’re presenting solutions that will allow our industry to continue to contribute significantly to the UK’s economy. As always we work diligently behind the scenes to defend our industry and help our members’ businesses thrive.
“Looking ahead, we will continue to work with the new government to ensure that tourism and our sector have a bright and positive future. Our commitment to advocating for your interests remains unwavering,” it added.
PASC UK and the ASSC also met Treasury officials to discuss the FHL proposals, and are currently encouraging the government to at least delay the plans beyond April 2025 due to the “devastating” impact on the domestic self-catering industry.
Alistair Handyside, chair of PASC UK, has previously warned that the changes would lead 20 per cent of hosts and property owners to quit the sector if they get the green light from the government. Both PASC UK and the ASSC have warned that the plans would also have a particularly detrimental impact on rural and coastal communities which rely heavily on short-term lets for revenue to stimulate their local economies.
In their meeting, the associations outlined the value and contribution that the self-catering sector makes, the economic benefits for rural and coastal visitor economies, and the major differences between furnished holiday lets and the longer-term residential sector, including how FHL businesses pay council tax, business rates and VAT, as opposed to their long-term landlord counterparts. PASC UK has called the combination of interventions on the small businesses in the sector “overwhelming”, adding that the changes “are too harsh” to adapt to in the space of seven months.
Meanwhile, Fiona Campbell, chief executive of the ASSC, has published a case study exploring the impact of Scotland’s short-term let [STL] regulations on the self-catering industry, highlighting the unintended consequences of the current approach since regulations were strengthened last October. The study examines principles of proportionality, consistency, accountability, transparency and targeting in short-term rental markets to provide a framework for assessing regulatory impacts in tourism and to support future industry growth without compromising public welfare.
In England, The Telegraph has reported that the new Labour government is accelerating plans for a crackdown on short-term rentals. New rules are being put in motion to give local councils across the country the power to identify locations where holiday lets will require planning permission, ahead of the potential introduction of a mandatory national registration scheme after that.
A Ministry source is quoted as telling the publication that the register will be introduced “as quickly as possible”.
Michael Gove, the former Secretary of State for Levelling Up Housing and Communities, first floated the proposal for national short-term rental rules in December 2022 as part of measures to “unlock” more homes in England and meet an ambitious target to deliver one million homes.
