The blog that we’re sharing today will be about several recent and proposed tax rule changes that could largely impact owners of holiday accommodations, the three main changes that you need to be mindful of are:

1. New plans to require planning permission for a property to be used as a short term let.

The Government has published a consultation which proposes introducing a requirement to obtain planning permission for  existing homes in England to be used as short term lets.

The proposed rules will apply to holiday lets and include properties let via online platforms such as Airbnb, in certain locations.

The Government is concerned that the increase in the number of short term lets in certain areas, such as coastal towns, cities and national parks, can reduce the availability and affordability of homes for local people.

The Government is also seeking views on providing more flexibility to homeowners to let out their sole or main home for up to 30 nights in a calendar year. Feedback will help inform planning measures that would help local areas have greater ability to control future increases in the number of short term lets in their area. 

Another measure would see the introduction of new permitted development rights to provide flexibility where short term lets are not a local issue, and which allows for this flexibility to be removed where there is local concern.

Changes could be introduced as early as later this year.

2. Changes in business rate rules which could see more landlords pay council tax.

Rules that allowed some owners of self-catering and holiday let accommodation to avoid paying business rates and council tax on their property in England were changed from April 2023.

Previously, owners of second homes could avoid paying council tax and access small business rates relief by declaring an intention to let the property out as holiday accommodation. This loophole meant some properties were never actually let and could benefit from a tax break.

As self-catering and holiday let accommodation is classed as a commercial let, it is subject to business rates instead of council tax. However, due to the way business rates interact with small business rates relief (SBRR), the Government felt some owners were abusing the reliefs. Therefore, from April 2023, stricter rules apply in England and Wales.

The change means second homeowners must pay council tax if they are not genuine holiday lets.😬

Rules from 1st April 2023

If your property is in England, it will be rated as a self-catering property and valued for business rates if it’s both:

• available to let for short periods for at least 140 nights in total over the current and previous tax years
• actually let for at least 70 nights in the last 12 months

If your property is in Wales, it will be rated as a self-catering property and valued for business rates if it’s both:

• available to let for short periods for at least 252 nights in total over the current and previous tax years
• actually let for at least 182 nights in the last 12 months

Different rules apply in Scotland and Northern Ireland.

Now last but not least…. 

3. Plans to charge VAT on holiday rental accommodation in the EU.

The EU plans to change the VAT rules in relation to holiday accommodation. The rules will impact landlords who let property in the EU using digital platforms, such as Airbnb. It doesn’t matter if the landlord is based outside EU. If their accommodation is located in the EU, the landlord will be impacted by these changes.  

From 2025 the new rules will see owners of EU property who rent out their accommodation on third party platforms see VAT charges passed on by the platform operators.

The EU believes the majority of holiday accommodation supplied via third party apps are not registered for VAT because the individual property businesses fall below the relevant VAT thresholds. Because digital platforms like Airbnb compete directly with the hotel sector the EU believes this means the traditional hotel sector is at a disadvantage and they wish to level the playing field.

Landlords impacted by these rules will need to factor in the additional VAT which will be taken by the online platform from their gross rental receipts.

The EU plans are designed to create a more equal tax environment and ensure similar VAT charges apply to all consumers booking holiday accommodation online.

Although these rules will not be introduced in the UK, it is likely the UK will look closely at this development and may decide to adopt similar measures.

Furnished Holiday Lets

While not all holiday accommodation will meet the criteria to qualify as what is known as a Furnished Holiday Let, there are a number of tax advantages which may be obtained by meeting the relevant qualifying criteria…😏

Any questions?? Look no further than Cangaf Ltd!! We would be more than delighted to help you understand whether your property qualifies as a Furnished Holiday Let and your tax position in relation to this.

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So Contact us right now for a free, no-obligation quote, and let us help you with all your accountant needs!