Furnished Holiday Lets

Save tax on your holiday lettings business

If you own a Furnished Holiday Let (FHL), capital allowances are a valuable form of tax relief, and thanks to recent changes in government legislation, it is now possible to take advantage of these tax benefits for FHL’s both here in the UK and in the European Economic Area.

Capital allowances are often misunderstood as a form of tax relief available to owners of commercial properties and FHL’s. In fact, it is estimated that well over 95% of FHL’s have unclaimed allowances available.

These allowances are currently available to UK taxpayers for money spent on buying or building FHL’s to be run within a property business. Depending on the specification of a property, up to 35% of the expenditure may qualify for tax relief.

There are specific criteria that are set by HMRC to enable allowances to be claimed.

• The property must be a Furnished Holiday Let either in the UK or EEA
• The owner must be a UK tax payer and the rental income or losses from the property must be declared
• The property must currently be available to let for 140 days and let out for 70 days
• If the property is let to the same person for a continuous period of more than 31 days this cannot be included. Any such periods of longer term occupation cannot total more than 155 days

Act now – The Rules are changing – Time is running out!

The rules regarding how owners of FHL’s can offset their capital allowance’s have recently changed. For expenditure incurred prior to 6th April 2011 allowances can be offset against total income and are not limited to the rental business. However, after April 2011, capital allowances can only be used against the income from the Furnished Holiday Let business itself.

Where a client still has ‘open’ tax years, there is currently an opportunity for capital allowance to be carried back and claimed against total income and gain a potential rebate of tax paid.

In addition to these rules, HMRC have proposed a general tightening up of the qualifying rules so that the property must be available to let for 210 days and actually let for 105 days of the year. These changes are expected to take place from April 2012.

In short, if you think you may have a valid claim, it is essential that you act quickly in order to take advantage of the current rules.

Please contact us for a free assessment of your circumstances.