The Labour government has been forced to abandon proposed changes to Furnished Holiday Letting (FHL) legislation in a last minute deal with the Conservative Party.

Following prime minister Gordon Brown’s decision to call a general election for May 6th, the main political parties have been involved in frantic negotiations to pass last minute legislation.

As part of negotiations to fast-track the Finance Act – which introduces the laws necessary to enact the Budget – through Parliament, Labour has been forced to scrap plans to remove tax breaks for the owners of holiday homes.

The changes would have increased tax bills for owners of holiday lets, including those who use them as a second home.

Shadow chancellor George Osborne had previously outlined plans to reverse the proposed changes as a cornerstone of the Conservative tourism policy.

Furnished Holiday Letting

The repeal was announced in the budget of April 2009, and would have had serious harmful consequences for the domestic tourism sector.

ABTA argues the change could have led to the loss of over £200 million from the British economy and 4,500 jobs.

Mark Tanzer ABTA chief executive said: “The repeal of the FHL rules would have had an extremely damaging impact on domestic tourism and many of our members’ businesses and we welcome the government’s sensible decision to set aside the proposed repeal for the time being.

“We will call on the new government in office after May 6th to listen to industry concerns and reform FHLs in a way that both achieves government objectives as well as supporting domestic tourism.”

A potential Labour government is likely to push for a reinstatement of the planned changes.

The party was also forced to drop a proposed ten per cent increase on the duty on cider as part of the deal with the Conservative Party.