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Our Tax Experts Simplify the Changes to the Furnished Holiday Let Rules

Following the recent Budget, the tax rules for Furnished Holiday Lettings are quite complicated. With many of us now seeking holidays within the UK, buying a holiday home as an investment to let out is an attractive proposition. Landlords must be aware though of the changes to the furnished holiday letting rules and seek professional advice before embarking on the letting of a furnished holiday accommodation.

Thomas Westcott's team of Tax Experts have put together the following guidelines to simplify the new rules for existing landlords and those considering investing in a furnished holiday let.

The taxation treatment of Furnished Holiday Lettings (FHL) was the subject of potentially extensive changes within the three budgets arising in 2009 and 2010.  Subsequently the 2011 budget established the revised tax legislation for the treatment of FHL commencing on the 6^th April 2011.The main points relating to this are listed below.

1.         The method of taxing Furnished Holiday Lettings for property in the UK and for property in the European Economic Area will be subject to the same regulations.  However FHL in the United Kingdom will be treated as a separate business from Furnished Holiday Lettings in the rest of the EEA.

2.         The current regulations in respect of the availability and actual letting of FHL accommodation will continue until the 5^th April 2012.   From the 6^th April 2012 accommodation must be available for letting for 210 days each year and actually let for at least 105 days each year.  There are additional rules if this is not met every year.

3.         The accommodation should not normally be in the same occupation for a continuous period of 31 days in a period of 155 days during a tax year.  Therefore anyone undertaking long term lettings should ensure that these do not exceed 155 days. 

4.         Profits may qualify for income tax relief in respect of personal pension premiums.

5.         Losses may only be offset against income of the same UK furnished holiday business or the same EEA furnished holiday business.

6.         Certain capital expenditure may qualify for tax relief via capital allowances.

7.         Loan interest is allowable in full in the correct circumstances and it may be beneficial to restructure present borrowing in order to maximise any claims.

8.         Capital Gains Tax Roll-over Relief and Entrepreneur's Relief are available for FHL properties/businesses.

9.         Under certain limited circumstances Furnished Holiday Lettings businesses may qualify for inheritance tax business property relief.

For further advice and information, contact one of Thomas Westcott's team:

• John Colwill, Ilfracombe Office: 01271 863662  
• Steve Cresswell and Paul Petrides, Barnstaple Office: 01271 374138
• Jonathan Poyner, Bideford Office: 01237 472725