However, Holiday Lettings believes that the Treasury’s proposed changes, that will take effect from April 2011, are in fact encouraging for those that run a self-catering holiday home on a full time basis as well as those considering entering the holiday lettings industry.
Why the three main proposed changes could be good for holiday home owners and the self-catering industry:
1) To raise the eligibility criteria; to qualify for FHL tax breaks owners must let a property for an annual minimum of 15 weeks (raised from 10)
In theory, increasing the annual minimum number of weeks that a property must be let for is a negative move but the reality is that it is only an additional five weeks on a previously low base.
Committed holiday let owners shouldn’t have any difficulty letting their home for 15 weeks of the year, at least ten of these are covered by peak period school holiday weeks.
If your business is already doing well this shouldn’t affect you.
2) Home must be made available for an annual minimum of 30 weeks (raised from 20)
Again another change that looks worse on paper, than it does in practice. This is basic common sense and linked to increasing the number of weeks a property is let. To have a greater chance of selling more weeks, the home needs to be available for more weeks.
For owners to benefit from this change they will have to increase the number of enquiries generated and bookings converted and this means proactively reviewing and in turn stepping up their marketing activity.
3) To restrict the use of loss relief from FHLs. If the proposed changes are made, holiday home trading losses will only be able to be offset against future profits from the same business. Under the existing rules, owners can offset trading losses from a holiday home against any other sources of income.
On the one hand it is important to remember that any changes will not come into play until spring 2011, so there is still time for owners to take advantage of the current FHL regime’s loss relief scheme.
On the other hand while one financial aid is being lost another is actually being gained. In theory, increased bookings should result in owners making more money and therefore reducing their chances of running the business at a loss.
Of the FHL consultation Kate Stinchcombe-Gillies, head of communications at Holiday Lettings, says:
"During the course of this debate it has become apparent that many holiday home owners are unsure what to expect from the changes and are fearful for the outcome of the consultation. Rather than continue the culture of scare mongering that has been evident over the last few months we want to reassure owners and make it clear that there are some very positive implications from the likely outcomes of the consultation."
"The extended advertising period gives every holiday home owner an opportunity to review and optimise their marketing strategy, something that any profitable business needs to do regardless of industry. Also, by keeping the Furnished Holiday Letting tax treatments relatively unchanged, but tightening the eligibility criteria, the proposals will continue to protect the professional holiday home landlord while increasing the incentives for part time landlords."
"In the main, these changes are an opportunity. If your business is performing well come 6 April 2011 there is very little to be concerned about and it should be business as usual. As the market leader in the holiday home industry, if the changes were remotely detrimental to our advertisers we would be the first to say so and seek a solution."
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