Tax rule changes on holiday properties could stifle trade

Government plans to change tax rules on holiday properties could leave eight in ten small businesses in the holiday sector at risk of closure, the Federation of Small Businesses (FSB) has warned.

Under current rules, businesses run in the holiday sector - known as furnished holiday lettings - must be available to rent for at least 20 weeks of the year and must be rented out for 10 weeks. As a result, they receive a number of tax breaks. Following Government proposals to change the tax rules, businesses in the holiday sector will be considered as residential landlords rather than as trading businesses. The FSB's survey results on the subject show that these tax changes could stifle trade, threatening the existence of the 60,000 self-catering firms across the country and costing jobs. The tourism industry alone could lose £200 million a year.

In the poll of 166 FSB members that run self-catering accommodation, more than half (52 per cent) said that they would have to make staff redundant if the tax rules were changed, and 81 per cent said changing the rules on their tax status would affect their financial viability.  Another 43 per cent said the tax rules would put them off expanding their business and eight in ten said they would not be able take on any new staff. 

The FSB is calling for the Treasury to ‘Give us a Break' and review the proposed changes to remove tax breaks which could have such a damaging effect on small firms and the holiday sector at such a crucial time.

John Wright, Federation of Small Businesses National Chairman, said: "Taking away reasonable tax breaks from small firms that run self-catering holiday properties could have a devastating impact on the sector. With eight in ten small businesses in the holiday sector fearing they could go bust, there will also be a human cost, with further job cuts at a time when unemployment is already spiralling.

"Small firms know they are crucial to pulling the economy out of recession and on to the road to recovery, but they need the Government to create a tax-friendly environment to do so. The FSB is calling on the Government to ‘Give us a Break' and review the proposed changes that could not only have a damaging impact on the 60,000 small businesses that own a business in the holiday sector, but on the wider community as well."