I was working on a fairly detailed tax case this week that included amongst other income some income from a ‘Furnished Holiday Let’ (FHL). After completing the return and because of the potential confusion created by the Labour governments pre-budget announcement that they were to abolish FHL’s and then there apparent back tracking before the end of the last parliament I thought I would jot down a few helpful notes.
For a property to qualify as a FHL the following requirements must be met:
- The property must be let on a commercial basis with a view to the realisation of profits.
- The property must ne let furnished.
- The property must be available for letting to the public as holiday accommodation for at least 140 days in a 12 month period. The number of days requirement is going to change from 6 April 2011 (subject to consultation).
- The property must be actually let for 70 days in the 12 month period.
- The property must not normally be let to the same person for over 31 days consecutive days during a period of seven months in the 12 month period.
- The property must be in the UK or the EEA.
If you letting meet the above requirements and qualifies as a FHL there are a number of very favourable tax advantages, including:
- Qualifying for CGT entrepreneurs’ relief
- The ability to use CGT roll-over relief
- Currently you can use FHL losses against other income in a tax year. This benefit will potentially be reviewed in from 6 April 2011 (subject to consultation)
- Currently FHL profits count as qualifying income for pension scheme funding
- The ability to claim Annual Investment Allowance (AIA) and Capital allowances for plant and machinery.
Obviously as with all taxes HMRC/the government may change the rules at any time so you do need to keep an eye on the situation if you have a FHL.
Crump Pearce & Co Ltd
Chartered Certified Accountants
43 Merstow Green
Evesham
Worcestershire
WR11 4BB
01386 49999
As ever professional advise should be sought before making any decision based on these notes and Crump Pearce & Co Limited cannot be held responsible for any loss however caused.
Tags: Furnished Holiday Lettings, Tax
