Spring Budget 2024 – Chancellor attacks holiday rentals and Multiple Dwellings Relief

Reply to the comment left by GlanACC at 13/03/2024 - 11:39
It may come down to how long you are spending managing them; that may not necessarily come down to just the number of properties but also due to the nature of each of the properties. Some properties will take longer to manage than others.

But the cost of actually managing a limited company is not high. So it would appear to me that if you had a number of FHL properties and were managing the lets yourself as a business you'd probably qualify for rollover relief if you incorporated.

Rich people can hang onto their holiday properties if it becomes too much hassle to rent them out. So as far as I can see this new announcement by the chancellor doesn't affect anybody other than the small people. There's nothing at all in the budget to incentivise putting a roof over somebody's head and provide them with a home.

Reply to the comment left by Beaver at 13/03/2024 - 13:40
Couldn't agree more, no incentive to invest in anything. We can't even give RR certification for its SMR reactors. We are a nation of shopkeepers, but even they are having a tough time. Think I will take £3000 and go to Rwanda.

Reply to the comment left by GlanACC at 13/03/2024 - 13:44
That's right: The people with lots of Airbnb flats in Edinburgh, Cardiff or London can just incorporate. And if they did that they'd probably be able to finance acquiring more flats to rent out on Airbnb from the small players deciding to sell. This change is only going to penalise the small players.

Those people who've just got one holiday home in the place where they intend to retire, e.g. Arran, Tenby or Newquay aren't going to sell it because that's their retirement dream: The cost of managing and maintaining a furnished holiday let is much higher than for a BTL so those people are just not going to rent out their property. So that will push up the cost of rentals in areas where people might wish to retire. So that's not going to help anybody; it's not going to help first time buyers in big cities or homeless people in coastal communities.

The only thing that would help is if somebody introduced some kind of tax incentive to make it worthwhile to provide somebody with a long-term home.

Thanks for that.
So "spending a significant amount of time on that business for it to qualify" is the 21 hours work per week test?

Reply to the comment left by PAUL BARTLETT at 13/03/2024 - 14:32
The issue is that typically HMRC treats BTL properties as investment income not employment income which is why we don't pay NI on our BTL income. There's a bit more on rollover relief on FHL properties here:

https://www.sykescottages.co.uk/letyourcottage/advice/article/capital-gains-tax-relief-for-holiday-lets#:~:text=Properties%20that%20qualify%20as%20furnished,of%20Chargeable%20Gains%20Act%201992.

This says:

"Business Asset Rollover Relief (BARR)
Properties that qualify as furnished holiday lets may also benefit from Business Asset Rollover Relief (BARR), under section 152 of the Taxation of Chargeable Gains Act 1992."

With a FHL business that has multiple properties there's an ongoing burden of work changing beds, cleaning, maintaining furniture etc: It seems to me that it would be much easier to argue that a business of this type would qualify for rollover relieve than your typical small BTL business. It's got to be a significant undertaking to qualify as a business so that might depend upon time, and this could depend upon the number of properties but of course you could have a unique property that might take more time to manage. Big garden for example.

And if the chancellor has now changed the system such that you can no longer deduct the cost/expense of doing the extra work of managing a FHL business then it may be worthwhile for a FHL business to incorporate.

So thinking about who benefits from this I would say that would be (1) larger incorporated FHL businesses who can just mop up properties from the small players and (2) the accountants and lawyers who understand the tax system who will be managing all that process of incorporation. The public won't benefit much because accountants and lawyers who understand the tax system (the principle beneficiaries of the change) already know how to minimise their tax burden.

It's only the little people that will suffer.

There's no incentive in these changes to put a roof over somebody's head for the longer term. There's no incentive to give them a source of energy that comes from non-renewables. It's just a stick bashing small people.