James Bailey, tax partner at Truro-based accountant Robinson Reed Layton has condemned the proposed changes to the tax treatment of furnished holiday accommodation as “illogical”.
The consultation document released this week by the Treasury, proposes three main changes to the tax rules for Furnished Holiday Accommodation:
* The required period of availability for letting goes up from 140 days to 210 days per year
* The required period for the property actually to be let goes up from 70 days to 105 days per year
* Losses from Furnished Holiday Accommodation can only be set off against profits from other furnished holiday accommodation
Bailey said: “It is difficult to disagree with the extension of the time limits for availability and for actual letting, and in any event most local holiday accommodation is already let for longer periods than the new minimum limits, but the restriction on loss relief is simply a cynical tax-raising measure.
“The special rules for furnished holiday accommodation were originally introduced because it was felt that this type of letting was different from ordinary residential letting, to the extent that a good case could be made that it was more like a trading activity than an investment.
“If you make losses in a trade, you can deduct them from your other income for tax purposes, and until now that has applied to holiday lettings as well. If these proposals go ahead, from April 2011 it will no longer be possible to claim relief for losses on your holiday let against your income from other sources for the year.”