12th August 2022What you need to know when running a Furnished Holiday Let
The prime month for summer holidays has arrived, so if you own and run a Furnished Holiday Let (FHL), or you are looking to start one, here are the key points to familiarise yourself with.
As with many tax regulations, it’s easy to be blinded by the detail and it is often hard to identify what is important. HW Fisher’s Tax Team share 3 key points that FHL owners should be aware of:
1. What is a FHL?
To be considered as a FHL the property must be commercially let, i.e. seeking to make a profit, it must be furnished and situated within the UK or EEA.
Further FHL Conditions:
- The property must be available to let as a FHL for 210 days in a relevant 12-month period; and
- You must let the property to the public for at least 105 days in a 12-month period.
Do note that longer term occupation (i.e. more than 31 days) where the property is in the same occupation, will be ignored.
2. What are the tax advantages for FHLs?
- If a FHL owner has a loan taken out to purchase the property, the full amount of interest paid in respect of the loan would be deductible from rental income.
- Any profits from a FHL can be treated as earned income, which is important if you wish to make pension contributions.
- FHLs may qualify for certain capital gains tax reliefs, for example roll over relief, gift relief and business asset disposal relief.
- Capital allowances are available to FHLs.
3. Losses made in a FHL
- If your UK FHL business makes a loss you can set the loss against other UK FHL profits in the same or subsequent years.
- However, UK FHL losses can not be offset against profits from ordinary UK property income.
- Losses made by UK and EEA FHL businesses need to be kept separate and cannot be relieved against each other.
4. When does a property stop being a FHL?
- When the property is sold.
- When the letting conditions are not met, after considering the averaging and period of grace elections.
- The property is used for private occupation.
For more information or to discuss specific circumstances, please get in touch.