Furnished Holiday Lets
I hope the following observations and remarks help address any concerns or questions regarding my reaction to the tax treatment of the holiday letting sector. I, of course, acknowledge that the UK hospitality and tourism industries make an important contribution to the UK economy. Holiday lets are an important part of the sector.
The Conservative government politicised public ‘levelling-up’ funds, but ended up levelling down. Liberal Democrats are calling for greater support for small businesses in the heritage sector, including an extension of the ‘Energy Bill Relief Scheme’ and a complete overhaul of the unfair business rates system.
The tax treatment of the holiday letting sector is complicated by the tax treatment of second homes, which, as you know, though a completely separate regime to that which applies to holiday homes, is interrelated because there has been such substantial switching between the two, depending on the relative merits from a tax-efficiency perspective. Since SBRR (small business rate relief) was opened up to holiday lets in 2012, there has been a substantial redesignation of second homes to the holiday let sector, which happens to coincide with the opportunity to take advantage of this exemption, and the advice of many tax advisors.
In Cornwall, there was an almost doubling in numbers and relief granted within a few years of the change. Though of course I’m not of course suggesting this doesn’t apply in your case, many of these properties will meet the obligation to be available for letting for the required minimum nights per annum, but the owners (who more often than not don’t live in Cornwall) arguably still use the property as a second home, for investment and personal purposes. Since 2012, with the addition of COVID aid, which more than doubled the public money used to support this sector, over £500m of taxpayers’ money has been used through this and other tax regimes and grants to support holiday lets in Cornwall alone. I suspect it was more likely to have been this which originally stimulated the Conservative chancellor to act in this arena.
I am of the view that there are more effective and even-handed ways of tackling the matter of holiday lets than the Government’s current proposals. For instance, the government could have tried to make long-term letting more attractive, or use planning laws to ensure that there is an optimum number of homes in each community for long-term occupancy. Such steps would also help local residents and local workforces who have been affected by the consequent impact on the price and availability of local housing stock.
Though I believe government should review all aspects of tax and property investment to ensure the balance of tax and incentives encourage a more equitable availability of properties for first homes, I’m only interested in the politics of justice and have no interest in the politics of envy, as some who campaign on this issue seem to be. Indeed, I also believe the government should clearly disaggregate those properties which have been created or built purely for the holiday letting sector and which would have occupancy and other planning conditions attached to them, and other properties which were originally or could otherwise be used for permanent occupancy.
On 12th September last year, I spoke in a debate on the regulation of short-term lets. You can read that transcript here (four interventions in total).
On 9th September, I led an Adjournment Debate in Parliament on the subject of Housing in Cornwall and the Isles of Scilly, which also touched upon this issue. You can read the transcript here.
Last May, I also brought a motion to Cornwall Council which covers the same subject. You can watch the debate here.
My Liberal Democrat parliamentary colleagues and I will continue to champion businesses which make a significant contribution to local economies through tourism and hospitality, whilst also seeking to strike a sensible balance with the housing needs of local residents.