Scrapping building allowance will cost hotel industry millions

Hotels consortium Best Western has demanded that the Treasury scraps plans to remove the Industrial Building Allowance (IBA) after a survey of its 292 member hotels revealed they will have to pay an extra £80m in tax.

In his last Budget as chancellor in March, Gordon Brown unveiled plans to phase out IBA – a 4% tax relief claimable annually for 25 years - over the next four years.

This will see tax relief for capital allowances on building fixtures reduced from its current 40% to 25%, 20% and then 10% up to 2008/2009 before being phased out.

Due to the significant investments in refurbishments, renovations and extensions in recent years the cost is set to average at almost £30,000 per hotel, Best Western estimated.

Previously this cost could have been offset against future profits. However, as of 2009 this will no longer be the case.

David Clarke, chief executive of Best Western, said: "When planning buildings and fittings projects to date all hoteliers, will have budgeted around this tax relief. For the Government to take this away after the project has been completed is extremely unfair on the tourism industry.

"This is why we are urging all independent hoteliers and members of the public to join with us in supporting the British Hospitality Association's campaign to stop this from happening."

The Best Western research will put more pressure on the Treasury, which this week admitted it was re-examining the plans to scrap the IBA after the negative feedback from hoteliers.

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By Daniel Thomas

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