The Serviced Accommodation Shake Up: Why Your Business Model Is Under Threat

The lucrative world of serviced accommodation (SA) is facing a perfect storm of regulatory and tax changes that could leave unprepared operators financially exposed. The abolition of the Furnished Holiday Lettings (FHL) tax regime, a landmark VAT ruling, and new digital reporting requirements from HMRC have created a new and challenging landscape for SA providers. Is your business model robust enough to withstand the coming storm? 

For years, serviced accommodation has been the go-to strategy for property investors seeking to maximise their returns. The promise of hotel-level income from residential properties, coupled with attractive tax advantages, has fuelled a boom in the SA market. However, the goalposts have now moved, and the arbitrage game that has been so profitable for so long is now under serious threat. 

The abolition of the FHL tax regime from April , a recent Upper Tribunal ruling on VAT, and the introduction of new digital reporting requirements for online platforms have created a new and challenging landscape for SA operators. The days of operating under the radar are over. HMRC and Local Authorities are now armed with the tools and the mandate to crack down on non-compliant operators, and those who fail to adapt will face a financial onslaught that could wipe out their profits and even their entire business.  The FHL Abolition: The End of a Tax-Advantaged Era The FHL tax regime has long provided SA operators with a range of valuable tax advantages, including: 

• Capital Gains Tax (CGT) reliefs: FHLs have been treated as business assets for CGT purposes, allowing operators to benefit from reliefs such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which reduces the rate of CGT to % on gains of up to £ million. 

• Capital allowances: FHL operators have been able to claim capital allowances on furniture, fixtures, and fittings, allowing them to deduct the cost of these items from their pre-tax profits.

• Pension contributions: Profits from FHLs have been treated as ‘relevant earnings’ for pension purposes, allowing operators to make tax-advantaged pension contributions. 

However, from April , the FHL tax regime will be abolished. This means that SA operators will no longer be able to benefit from these valuable tax advantages, and their profits will be taxed in the same way as standard residential lettings. This will have a significant impact on the profitability of many SA businesses, and operators will need to factor this into their financial planning.  The Digital Dragnet: HMRC’s New Era of Transparency 

Adding to the pressure on SA operators are the new digital reporting requirements for online platforms. From January , platforms such as Airbnb and Booking.com are now required to report the income of their hosts directly to HMRC. This means that the days of undeclared or under-declared short-stay income are over. HMRC now has a direct, verified data feed on your gross earnings, and they will not hesitate to use this information to cross reference your turnover with your VAT and planning status. 

This new era of transparency means that there is nowhere to hide for non-compliant operators. If you are not correctly accounting for your income and VAT, it is only a matter of

time before HMRC catches up with you.  The Planning Minefield: Navigating the Complexities of Use Class As if the tax and reporting changes were not enough, SA operators also have to navigate the complex and often confusing world of planning law. The key risk for SA operators is the failure to secure the required Change of Use planning permission. 

A typical residential property falls under Use Class C (Dwellinghouses). However, if a property is used for short-term letting beyond a certain threshold (generally accepted as -  days, depending on the area and specific local rules), it can be deemed a material change of use to a C (Hotel) or a ‘Sui Generis’ (its own class) use, requiring express planning permission. 

Many Local Authorities, particularly those in high-demand tourist and residential areas, are aggressively prosecuting operators who have failed to secure this change of use. A Planning Enforcement Notice requires immediate cessation of the illegal use, and failure to comply is a criminal offence, punishable by an unlimited fine in the Magistrates’ Court.  The Stay & Co. Solution: Your Shield Against the SA Shake-Up 

In this new and challenging environment, you can no longer afford to leave your SA business to chance. You need a partner who understands the new regulatory landscape and can provide you with the expert guidance and support you need to protect your business. 

At Stay & Co., we are more than just property managers; we are your dedicated compliance shield. We can help you to navigate the complexities of the new SA landscape and ensure that your business is not just compliant, but also profitable. 

Our SA survival plan includes: 

• A VAT liability firewall: We work with specialist tax partners to conduct a full, independent audit of your current SA operating model against the latest HMRC guidelines. We will then recommend an immediate restructuring strategy to ring-fence your profits from the % VAT shock. 

• Planning permission and local tax verification: We perform a hyperlocal planning audit for all your properties, advising where a Change of Use application is essential and managing the process to mitigate the risk of criminal planning enforcement. We also ensure that your Business Rates/Council Tax status is correctly registered to avoid backdated penalties and the Council Tax premium.

• HMO/SA crossover management: If your SA units also operate as HMOs, the compliance stack is doubled. We can manage this impossible compliance crossover, protecting you from both a Planning Notice and a £, HMO fine. 

Don’t wait until it’s too late. Contact Stay & Co. today for a confidential, zero obligation Serviced Accommodation Operational Risk Assessment. We will show you exactly where your model fails under the new rules and implement a plan to guarantee your survival and profitability. 

Call us on Whatsapp  0121 2853705 or click here to claim your assessment. 

This article provides general guidance only. Always seek independent legal, tax, or financial advice before making decisions affecting your property or business.  Amanda Woodward is a UK property entrepreneur specialising in investment, development, management, and training. After buying her first London property in 2010, she achieved financial independence before 30 and built a business that celebrates 15 successful years in 2025. Her portfolio spans buy-to-lets, HMOs, serviced accommodation, and hotel developments across Staffordshire, Cheshire, Birmingham, London, and the South East. A highlight of her career was launching her first hotel in 2019. Beyond property, Amanda has educated thousands of aspiring investors, from small training sessions to major events such as the Rich Dad, Poor Dad seminars and the Women Achievers Congress alongside Kim Kiyosaki. She now co-hosts The Essential Property Podcast with Paul Samuda, sharing insights from over a decade in the industry.

Visit https://www.amandawoodward.co.uk/ to learn more about her work and latest projects.