Has your Furnished Holiday Lettings business been affected by COVID-19?
There are various tax benefits which arise from letting property as a Furnished Holiday Let (FHL).
These are outlined in our factsheet below:
To qualify as a Furnished Holiday Let, your property must be:
- available for 210+ days per tax year; and
- occupied for 105+ days per tax year (with no more than 30 consecutive days to the same person).
These tests are normally applied from 6 April to 5 April but when a Furnished Holiday Let business commences (or ceases), the tests are applied for the first (or last) 12 months of trade.
Over the last 12 months - the restrictions on movement, resulting from the COVID-19 pandemic, will have impacted on the actual occupation test for Furnished Holiday Let properties.
If your Furnished Holiday Let has not achieved 105+ days of occupation, you may be able to maintain your Furnished Holiday Let status by making:
- a Period of Grace election; and/or
- if you own more than one FHL, an Averaging Election.
If you acquired your first Furnished Holiday Let property in the last 12 months, it is likely that the Furnished Holiday Let tests may not have been met. This means that any income you have received will be taxed differently.
For existing Furnished Holiday Let businesses - the availability criteria are a concern.
At present, HMRC are not commenting on whether periods of lockdown, which legally prevented people from travelling, will count towards periods of availability.
Where the Furnished Holiday Let tests are not met in a tax year, without the help of either election noted above, the income must be treated as normal rental income.
- Some tax benefits such as the ability to deduct mortgage interest in full will not be available and possibly complex adjustments will be required to Capital Allowances.
- If you are planning to cease your Furnished Holiday Let business and sell your Furnished Holiday Let property, losing Furnished Holiday Let status could affect the Capital Gains Tax payable.
If you would like our help with your new Furnished Holiday Let business or are concerned over how the events of the last 12 months affects the tax treatment of your existing Furnished Holiday Let business.