The British Hospitality Association (BHA) is urging the Government to allow hotels to benefit from the Enterprise Investment Scheme (EIS), following the Chancellor of the Exchequer's failure to include hotels in the scheme in his autumn statement.
The scheme was introduced to help smaller companies raise finance by offering a range of tax reliefs to investors who purchase new shares in those businesses. Hotels were originally able to qualify under the scheme, but were disqualified in 1998 under the Labour Government. Given the current funding difficulties that many companies face, the ability of hotels to be able to take advantage of EIS would provide a boost to business.
However, while hotels are excluded from the scheme, restaurants and pubs are able to benefit from EIS.
The BHA was led to believe that an announcement to remove the restriction on investment in hotels from 6 April 2012 would have been introduced in the autumn statement or in the draft Finance Bill clauses which were published in December.
Martin Couchman, deputy chief executive, described the continuing restriction as "very disappointing".
"We had many indications that the restriction would be removed but this did not happen. At a time when many small and medium-sized hospitality businesses want to expand and develop, the EIS scheme would have opened the door to new funding opportunities.
"The change would have been potentially very good news for many businesses - and their investors - because it would have encouraged investment in the industry through new sources of finance."
Couchman said that the BHA was continuing to press the Treasury for changes in the EIS rules.
"We cannot understand why independent hotel operations were ever disbarred from benefiting under the scheme. One of the Government's principal objectives is to encourage investment in industry and the EIS scheme has the potential to encourage independent hospitality businesses to expand and develop. We shall continue to argue that the scheme is highly relevant to hotel operations."
Robin Sheppard, chairman of the 54-strong Bespoke Hotels group, which is currently looking for finance to support its expansion, said that it was "iniquitous" that restaurants and pubs could benefit from EIS and hotels could not.
"It is incredibly difficult for hotels to raise money from the banks and I think the Government has missed a trick by not helping hotels though EIS," he said.
By Janet Harmer
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