Holiday rentals for second home provide no tax havens

Date: October 27, 2009

Holidays home owners will face the possibility of  additional annual tax charges which could be in the £thousands under new laws expected to be announced by the Chancellor Alistair Darling in his Pre-Budget Report (PBR) next month. The move intends to raise an extra £20 million tax revenues per annum by abolishing current tax breaks for second home owners. The initiative is justified by stating that Britons who rent holiday homes enjoy a greater tax benefits than those elsewhere in the EU.

The law changes will affect an estimated 60,000 second home owners equating to roughly 75,000 properties across the country.  Understandably areas identified as being hit hardest are predominantly rural areas including the west country, the lake district and parts of Wales and Scotland. The law is only applicable to second home owners that rent their second home available to paying guests for at least 140 days a year which equates to a rental minimum of 70 days. With the anticipated new law property lenders will be considered investors.

The news has not been the most popular with the majority of business owners and 95 MPs at Westminster having signed a Commons motion calling for a consultation on the changes that can cause significant loss of jobs and damage to rural and seaside economies and may end up costing the tourist industry £200 million annually. Kurt Janson, policy director for the Tourisms Alliance, said “If you do away with the old rules, the profit of these businesses will reduce by about a third”.

The good news is that HMRC continues to listen to views about the law change and the publication in the PBR will only be draft legislation.

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