‘We may have to give free breaks to avoid holiday lets tax trap’

FEARS BUSINESSES WILL BE FORCED TO CLOSE ACROSS WALES UNDER NEW RULES

A HOLIDAY cottage owner warned they may need to give out free breaks to meet new letting rules in Wales.

Holiday lets used as businesses can pay business rates instead of council tax - savings thousands of pounds - but the criteria to qualify as a business has tightened.

In April this year the occupancy threshold to qualify went from 70 to 182 days. Local authorities also have the powers to increase the council tax premium to 300%, although 150% is the highest premium charged so far.

Tourism groups in Wales have warned about the potential impact - saying that some holiday let businesses will be forced to close impacting the businesses themselves and wider economy.

Welsh Government said the measures will help to support people to live in their local communities by reducing demand for second homes.

A new report has now been released on the current state of the tourism scene in Wales - with warnings in there about the impact from the lettings changes and also the proposed tourism tax.

The Welsh Tourism Business Barometer gives a snapshot about how the industry is performing. It has been a quiet start to the year in comparison to 2022 with a variety of factors at play.

The figures show 18% of businesses have had more customers to date this year than in the same period last year, 38% have had the same level, but 44% are down.

Hospitality and attractions are faring reasonably well but accommodation sectors are not.

The report says it is a similar situation in other parts of the UK.

Unsurprisingly the biggest concern is the cost of living crisis - which is both impacting businesses and their customers, who have less money to spend on breaks.

Poor weather earlier in the season was also blamed with the survey done before the recent sunny spell.

Forward bookings for the summer are also down on last year. One positive was an uptick in overseas visitors.

The overall downturn is not universal either with some operators up on last year and very positive about the year.

While costs are the biggest concern (49%)- a sizeable proportion (24%) cite Welsh Government’s tourism policies as a worry - with a higher proportion when this is broken down to just the accommodation sector.

The report said: “There are several Welsh Government policies at various stages of development which are causing high levels of concern, most significantly the ‘182 day rule’.

“This could see many self catering operators become liable for paying a premium domestic council tax rate on a ‘second home’ instead of qualifying for non-domestic rates as they have been doing.

“Close to half (44%) of self catering operators have cited

Welsh Government policies as a concern unprompted.

“The cited effects on operators include reducing prices to meet the required occupancy level, high levels of stress, and in some cases, ceasing trading.”

This was reflected in the comments from businesses. These are anonymised for the report.

One self catering cottage owner warned: “By October, if we haven’t met the 182 days, we might find ourselves needing to give holidays away.

“No-one wants to work for nothing. It’s a big concern.”

Another said: “I have had to keep my prices low to bring customers in to fill the 182 day requirement so I’m not expecting a hugely profitable year this year.”

The proposed tourism levy is also causing some concern.

A North Wales caravan park operator said: “A lot of our customers are worried about the tourism tax.

“We’ve been told that they’ve booked their holidays for Wales before the tax comes into play.”

Another park in the region stated: “We’re on the border [with England] and have been directly told from some of our normal seasonal customers that they might reconsider holidaying in Wales should a tourism tax come in.”