Is There A Future For Self-catering Beyond The Pre-budget Statement?

Dec. 9, 2009 - PRLog -- Alan Taylor, Managing Director of Blue Chip Vacations commented:
“Today’s news is a blow for the self-catering sector, the tourist industry as a whole and the many people that depend on the sector for jobs.  It is an ill-considered, short-term government policy that will be a kick in the teeth for hard working tourist businesses across the South West.  There is every chance that this announcement could lead to a significant number of holiday-home owners extracting themselves from the self-catering market, reducing the number of properties available to tourists now that:

•    entrepreneurs relief on Capital Gains Tax will come to an end on property sales

•    capital allowances have been slashed ending the ability for owners to offset large expenditures such as kitchens against income

•    losses can no longer be offset against other income

However, we are advising against a kneejerk reaction amongst second home owners who, with proper planning, can still make a solid income from the growing ‘staycation’ market."

To reduce the impact of the proposed changes Blue Chip Vacations and Bishop Fleming are advising that the following 4 point plan be considered and put into place swiftly where relevant:  

1.    If properties require upgrades such as new furniture, new bathrooms or new kitchens, work needs to be scheduled before April so that the tax benefits can be reaped; currently large expenditures qualify for capital allowances against income from the current tax year, giving a window of opportunity up until the end of the current tax year to make necessary improvements to ‘future-proof’ properties.

2.    It is not too late to make a claim for capital expenditures that may have been incurred in previous years. These include features integral to the property, such as heating, air conditioning, sanitary fittings, swimming pools etc. Once claimed before next April, claims for annual writing down allowances may continue

3.    Where the business provides services for the holiday maker, over and above those provided by a landlord letting out property, and the owner lives on the complex, it may be that the business amounts to a trade, and the above reliefs would continue to apply. There have been numerous tax cases on this area and it is essential to seek professional advice.

4.    Entrepreneurs relief will continue to be available on disposal of holiday properties within 3 years of the deemed cessation on 5 April 2010, until 5 April 2013.  Those individuals to whom entrepreneur relief applies will now need to plan any sale to fall within this window.

Commenting on the technical tax implications, Andy Richens, Technical Tax Director at Bishop Fleming, advised: “Whilst the removal of these reliefs had been expected, it does not lessen the blow for South West holiday letting businesses. However, opportunities do remain between now and next April, and business owners are advised to contact professional tax advisers in order to maximise these.”

Alan Taylor added: “There is a distinct danger that poor planning and short-term panic among self-catering property owners could result in a mass migration into the long-let market, which could depress rental rates and thereby diminish any benefits that would be gained from moving into this sector.  

"At a time when bookings are reaching record levels for self-catering breaks in the South West, it is important to take a step back and consider the bigger picture, whereby proper planning and prompt action can negate many of the potentially negative outcomes from today’s announcement by the Chancellor."

”Taylor also went on to say: “For the prospective second home buyer, today’s announcement should not prevent purchasers from picking up property at the bottom of the market.  The trick here is to buy a property that either requires very little work or one where any necessary work is reflected in the price of the property at purchase.  Long-term the potential capital appreciation on self-catering second homes still makes this form of investment attractive to individuals looking to make more from their money than they currently can from poor performing assets or bank accounts.”

Blue Chip Vacations has over 600 properties across the West Country including more than 500 that are luxury 4 and 5 star rated.

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Blue Chip Vacations has over 600 properties across the West Country including more than 500 that are luxury 4 and 5 star rated. Devon cottages, Cornish cottages, and luxury self-catering coastal houses and apartments form the core of the property portfolio. Each property has been chosen for its stunning location, amazing coastal or rural views or hi-spec interior, and each are reviewed to ensure they meet the high standard set not only by Blue Chip Vacations, but also by Quality in Tourism.

A silver award winner at the prestigious South West Tourism Excellence Awards (website of the year category), and silver award winner at Green Tourism Business Scheme (GTBS) Awards 2009, Blue Chip Vacations prides itself on its customer service, and its corporate and social responsibilities