Carmichael backs business concerns on blanket end to Furnished Holiday Let tax rules

Orkney and Shetland MP, Alistair Carmichael, has backed concerns raised by business groups including the Association of Scotland’s Self-Caterers and the Country Land and Business Association (CLA) about the government’s draft legislation to end the Furnished Holiday Let (FHL) tax reduction scheme from April 2025. The CLA has voiced concerns that the change to tax rules will be particularly hard on diversified rural businesses such as farmers.

Currently, the FHL tax relief applies to properties available for holiday letting for at least 210 days a year, with actual lettings for at least half that time. Ending the FHL relief is expected to save the Treasury around £245 million annually by 2028-29.

The government plans to end the FHL tax regime, partially in response to concerns that increased investment in holiday let properties would reduce the availability of housing for permanent residents. In 2022, the Office of Tax Simplification (OTS) suggested that the Government should consider whether the FHL regime was still needed. However, they added that abolishing the regime could introduce complexity and uncertainty.

Mr Carmichael said:

“We can all agree that more housing is needed in almost every corner of the country including the isles. I am concerned, however, that in making a one-size-fits-all taxation change to discourage furnished holiday lets, we may wind up doing harm to the visitor economy without improving the underlying housing issue. The Treasury always wants to have the same rules for every part of the country but the needs of cities like London and Edinburgh are vastly different to those in Orkney and Shetland.

“Many people in the isles from different backgrounds have found a benefit in small-scale holiday lets, whether that is farmers and crofters diversifying their businesses or older families downscaling their needs. Farmers in particular have for years been encouraged to diversify so it would be a backwards step to punish them for doing so now.

“Local authorities in rural communities need the scope and support to encourage the right sort of housing development and to ensure that the visitor economy complements our local population without overwhelming it. There is a balance to be struck, but it should be informed by local needs.”