FUW meets Plaid MP over repeal of holiday home rules

A Farmers' Union of Wales delegation has told Plaid Cymru's environment, food and rural affairs spokesman Elfyn Llwyd of concerns about the Westminster government's decision to repeal rules allowing UK holiday accommodation owners to claim certain tax benefits.

The delegation of FUW members and officials met the Meirionnydd and Nant Conwy MP at Bettws Bach farm, Rhoslan, near Criccieth, where farmer's wife Anwen Jones lets out four holiday cottages.

"The main purpose of the meeting was for Mrs Jones to inform Mr Llwyd how scrapping these benefits will seriously affect the income of the many FUW members who have diversified into letting out holiday accommodation," said the union's Caernarfonshire county executive officer Gwynedd Watkin.

"We will be calling on the Chancellor to change his decision, announced in last April's Budget, to scrap the Furnished Holiday Lettings (FHL) rules."

Under the rules, which are set to be repealed next year, owners of holiday homes and cottages in the UK will suffer the loss of trading status which means losses from FHLs cannot be offset against other income.

FHL income will no longer be eligible as relevant earnings for pension purposes and the sale of FHLs will no longer be eligible for the following capital gains tax relief (CGT): roll-over relief and Entrepreneurs' Relief.

CGT on a holiday home can also be postponed by investing in another property within three years of selling the original home. Owners may also be able to benefit from Entrepreneurs' Relief and pay the business rate of CGT.

As well as CGT relief and offsetting trading losses, the FHL rules include "capital allowances" which allow deductions of a certain percentage of the cost of each item of furniture or equipment provided in the property.

This is normally 50 per cent of the cost in the year it was purchased and 25 per cent of what is left for each year after the initial purchase.

For a property to qualify for the FHL benefits until 2010, it must be available for commercial letting as holiday accommodation for a minimum of 140 days per UK tax year and let for at least 70 days. Lets of more than 31 days to the same person cannot be included.

"Mrs Jones runs a genuine tourism business and has taken heed of past government advice encouraging diversification into the tourism industry. But it is now ironic that they will be penalised if these rules are repealed," said Mr Watkin.