Government tax changes 'to hit holiday homes'

Date: 26th November 2009

Plans to increase the tax burden for owners of second homes could have negative financial effects on small businesses.

New analysis from the Federation of Small Businesses (FSB) shows that 52 per cent of people running a self-catering holiday business believe that they would have to cut staff numbers following the proposed rule change.

Meanwhile, 81 per cent say that the reforms would affect their "financial viability" - and a similar number said that they would not be able to take on any new staff.

Under the proposals, holiday home landlords would be classified as a normal residential landlord instead of a trading business.

This would affect the current tax breaks on offer to the group, contingent on the landlords making the flats and houses available for rental for 20 weeks in the year and actual rents being paid for ten weeks.

John Wright, FSB 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.

"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 government also recently announced plans to increase the business rates cap, potentially affecting many smaller retailers.

Posted by Tom Papworth