MP challenges Treasury to clear up tax conundrum for tourist industry

17.03.2010  St Ives MP Andrew George yesterday challenged the Government to justify proposed changes to tax increases which could undermine the viability of holiday letting businesses.

During Treasury questions Mr George asked Tax Minister Stephen Timms MP to explain the inconsistencies that will be introduced into the tax regime when the Government withdraws the rules for Furnished Holiday Lettings (FHL) on April 6th.

The FHL rules are being repealed by Government to bring UK legislation in line with EU regulations. However, the FHL rules were originally created to distinguish between the income generated by property ownership and that generated by trading using a property. This distinction helped businesses providing serviced tourist accommodation avoid paying the same tax as landowners whose income was generated from primarily from property investment rather than providing services.     

Under the new rules businesses providing holiday lettings on static boats are still deemed to be ‘trading’ and thus receive tax benefits safeguarded by the old FHL rules. However, businesses letting chalets and apartments will not be classed as trading and it is unclear how caravan parks will be classified.

Mr George led a Parliamentary Debate in February and called on the Government to withdraw their plans and consult the industry on the impact that the proposed changes would have on the tourist industry.   

“The Government simply has not thought this through," said Mr George. "The Minister himself could properly answer my concerns about the inconsistencies between letting on water, wheels and those fixed to the ground.

“I intend to make sure that businesses in the interests of the West Cornwall and Isles of Scilly tourist industry – vital to the local economy – are better understood by Government Ministers.”