Campaign launched to fight rural tax bombshell

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A campaign has been launched to fight proposed tax changes that could impact on thousands of rural business across the region.

Hidden in the small print of last week’s Budget were plans to change the tax regime for people who let property as holiday accommodation.

The Government, in an effort to bring the UK in line with EU law, is planning to scrap various tax reliefs available on furnished holiday lets.

Cornwall-based accountants and tourism specialists Winter Rule say the changes could have far-reaching implications for the rural economy by severely reducing the stock of quality holiday accommodation in the south west.

The firm is now gathering evidence to present to Treasury Ministers before the new Finance Bill – which is published on today (April 30) – is given Royal Assent in June.

The South West has around 40% of the UK’s self catering sector, and 20% of visitors to the region come on self-catering holidays.

The campaign is being led by Winter Rule tax partner John Endacott, a national expert on entrepreneurial tax issues who makes regular representations to the Treasury and HM Revenue & Customs on tax policy.

He said: “The Government is content to suggest that this is all about second homes but the impact could be felt by real businesses such as hotels with self-catering accommodation, backpacker lodges, holiday parks, static caravan sites and purpose-built holiday complexes with shared facilities like swimming pools.

“It seems that Ministers simply haven’t thought this through and what we will be arguing – with the support of the industry – is that there needs to be a clear definition of what constitutes a trading business in this sector. Instead the Government is suggesting it will treat them as something different, thereby losing them the tax advantages they are entitled to.

“There is a big risk that the proposed changes will cause the stock of high quality holiday accommodation in the West Country to reduce, which will have a damaging impact on our economy at this difficult time. Perversely, this change could even lead to an increase in second homes if holiday accommodation is sold off.”

Endacott is planning to host a round-table discussion with industry leaders to gather evidence on the potential impact of the changes for his Treasury submission, and is already in contact with colleagues in holiday regions across the UK including Scotland, Yorkshire, Norfolk and Dorset.

The current rules include tax relief for expenditure on furniture and equipment in rental premises and relief for current year losses. The Government is planning to abolish the rules from April next year, although the full details have not yet been published.

Tracey and Jeremy Griffiths run Lusty Glaze Adventure Centre in Newquay, and have furnished rental property on the site that currently qualifies as a trading activity.

Tracey Griffiths said: “Small business always seem to lose out in these kind of changes.  Larger businesses have the ability to absorb changes such as these but for us it has a fundamental impact on what we are trying to achieve, which is a successful business employing local people and trades people.”

The campaign is already attracting widespread support.

Malcolm Bell, chief executive of South West Tourism, said: “Our region has around 40% of the country’s self catering sector and it’s a massive contributor to the rural economy. But there seems to be a view in Whitehall that this is not a real industry with people running real businesses, and that’s a total misunderstanding of the whole sector. 

“This is a classic case of the law of unintended consequences and what Ministers have to understand is that these properties can have 35 to 40 families going through them a year, supporting local shops, pubs and restaurants, and aren’t just let out for a handful of weeks. Looking ahead in a difficult market, the self-catering sector is likely to become even more important and is a very good quality offer, so we do not want to see punitive tax changes that stifle investment.”