Chartered accountancy firm MacIntyre Hudson has said that the Chancellor’s budget decision to phase out industrial buildings allowances will hit the hotel sector hard.

The 4 per cent capital allowance on expenditure on industrial and commercial buildings will decrease over the next four years until it is abolished entirely in 2011.

Victor Dauppe, tax principle at MacIntyre Hudson, said: “The leisure sector, and particularly the hotel companies, are the major losers in Gordon Brown’s ‘zero sum’ budget.

“Substantial building projects, carefully costed over a 20 or 30 year life with heavy borrowings tailored to after-tax returns, are now retrospectively made imprudent and possibly unaffordable as the tax rug is viciously tugged from underneath.”

He continued: “Larger players can probably accept the withdrawal of 4 per cent industrial buildings allowance in return for the 2 per cent reduction in the main rate of corporation tax, but the impact will be catastrophic for small companies.

“This is a tax hike that they have not budgeted for and which they may not be able to fund, since their business model has been overturned by the unexpected denial of industrial buildings allowance.”