Bad Legislation has Unintended Consequences in Norther Ireland

Norther Ireland Self-Catering and Glamping Damaged by Poor Legislation

The announcement to remove normal business tax allowances from the Furnished Holiday Lettings sector is not only a hammer blow to owners and operators such as myself, it is a blow to the wider tourism economy of Northern Ireland, one of our largest sectors and owned predominantly by micro to small businesses. It is also random discrimination against one sector of the accommodation industry.  A treasury statement in one sentence talks about the value of FHL to the tourist economy and then refers to FHL as Landlords. In this they are recognising that FHL are tourist businesses, yet they want to discriminate against us by redefining us as landlords.

This is erroneous as FHL or Self Catering owners are tourism business owners and not landlords. This is illogically linking the type of building to one type of business. Bed and Breakfasts operate in houses and apartment blocks yet they are not affected by the changes. Many hotels have lodges which are not affected by the changes.

Flawed Logic of Legislation

Those running FHL are not in the property business we are in the tourism business.

“The measure promotes fairness and aligns the tax rules for furnished holiday lettings with those for other property businesses”. Also they say they want “to level the playing field for all individual landlords by equalising the tax treatment of short-term furnished holiday lets and standard residential properties for longer-term tenants”. Again they are erroneously classifying Self Catering operators as landlords.

Landlords provide long term housing as homes for people. Self Catering provides holiday accommodation, as do hotels, bed and breakfasts and boarding houses.

This is putting Self Catering Businesses at a severe disadvantage against all other holiday accommodation providers. By rough estimation this additional cost could be as much around £8k per anum for £100k revenue, which will make many Self Catering businesses unviable, which will reduce the availability for tourists

The announcement to remove normal business tax allowances from the Furnished Holiday Lettings sector is not only a hammer blow to owners and operators, it is a blow to the wider tourism economy, one of our largest sectors and owned predominantly by micro to small businesses. It is also random discrimination against one sector of the accommodation industry.

Our sector will have less funds available for continuous improvement and expansion so the changes will bring about a drop in standards of provision of tourism accommodation. I am aware that our prime tourist regions are still seriously underprovided with accommodation.

This is just a cheap attempt at vote-catching by a panicking government under the guise of improving the housing stock. A knee-jerk reaction of a failed government. Also what appears to be viewed as an ‘easy’ source of revenue for the Exchequer and a magic wand to solve the housing crisis, is in fact anything but.

The current allowances given to Furnished Holiday Lettings are not tax loopholes, they are legitimate allowances given to all tourist accommodation businesses in relation to the costs of running and maintaining a business. It simply allows these businesses to deduct the legitimate mortgage, capital and other expenses incurred in running their business, before being taxed. It is the same for any business and all other accommodation providers. Accordingly, it is discriminating against one sector of the industry.

Increasing the tax burden on Furnished Holiday Lettings across the UK’s coasts and countryside won’t just be to the detriment of owners like me who are providing affordable and accessible options to families who want to holiday in the UK, it will strip many of the associated jobs which rely on the sector from local economies, such as roles in cleaning, pubs, cafes and tourist destinations. It will also cause immense harm to farmers who have been encouraged to diversify to allow their farms to be viable.

Negative Effects of Furnished Holiday Lets Legislation in Northern Ireland 

1. Mortgage Relief – Removing the allowance on Mortgage or Loan Interest payments will cost £3000-£6000 per year for someone with a £100k mortgage or business loan.

2 Capital Expenditure Allowance – Removing the relief on Capital Expenditure will mean that operators will be less able to afford to upgrade furniture, beds, kitchens and bathrooms or to remodel in our essential continuous improvement. Accordingly, standards will diminish making our tourism industry less attractive and less competitive.

3 Roll-Over Relief- Removing the roll-over relief on property sale cash to be used for purchasing a new property means that many businesses will stagnate as they could not afford to upgrade because their cash remaining after Capital Gains Tax would be significantly less than the value of the property they had just sold.

4 Small Business Tax Relief.- The removal of the small business tax relief of 10% on capital gains is dealing an enormous blow to anyone who decides to sell. For a capital gain of £100k individuals will be robbed of £15k from their pension in extra tax. This will be a major blow to anyone retiring and is an unfair and excessive move, particularly when the chancellor’s tweaking of income tax and national insurance will only make a few hundred pounds of difference to all other individuals.  According to the Sunday Times article, which first announced this proposal, there are 127,000 properties that fall within the Furnished Holiday Let regime. Many of these properties will have planning restrictions imposed on them so they cannot be used as a residential property.

That needs to be put into context with the target to build 300,000 new homes each year and the 1.5m empty properties in the UK. The real solution here is to build more homes and bring empty ones back into use and not destroy a sector which is an essential element of the visitor economy and is so crucial to employment and growth in rural and coastal communities.

The Government is acting without the necessary data on the sector it needs to create reasonable and proportionate policy. All this new policy will do is simply create more empty homes. Empty second homes bring no economic benefits to their communities. They sit empty, they do not result in the employment of local people and simply hollow out the community. Basically, it was another of Mr Sunak’s failed cheap vote-begging tricks which has now been blindly adopted by Starmer.

Opion Piece Article by Lyn Fawcett  owner of  Causeway Cottages and Cyprus Harbour View in Carrickfergus, Co Antrim, Northern Ireland. A lifetime commitment to tourism as well as Self-catering owner, also a board member of Tourism Northern Ireland. A senior Ulster University Academic teaching and researching in hospitality and tourism.