Changes To Taxation Legislation Concerning Furnished Holiday Lets

Changes To Taxation Legislation Concerning Furnished Holiday Lets

The Taxation Services team at Greenhalgh are currently advising a number of clients in light of the changes which are soon to come into effect concerning taxation and furnished holiday lets (FHL).

The changes mean that businesses and individuals who own FHL will have to rent their property for longer each year in order to continue to qualify for tax relief which enables them to deduct certain costs from the income on which tax is paid.

In order to continue to qualify for the tax relief under the new legislation, the number of days a FHL must be available to let to the public will increase from 140 to 210 days per year.  The days the property must actually be let will also increase, from 70 to 105 days per year.

Another change will mean that any losses made on the FHL can no longer be set against other income, such as earnings or investment income.  Rather they will only be able to set losses against future income from that FHL business.

Generally the changes have effect on or after 1 April 2011 for businesses and 6 April 2011 for individuals.  However, the increases in the number of days a property is available to and actually let do not come into effect until 1 April 2012 and 6 April 2012 for businesses and individuals respectively.

The new legislation will also bring the UK in line with European Law, with the introduction of equal tax treatment for owners of properties in the European Economic Areas (EEA) and the UK.

Commenting on the new legislation, Michael Henshaw, Director of Taxation Services at Greenhalgh, says, “The announcement of these changes last year ended the uncertainty surrounding FHL, as the previous Government had pledged to scrap the tax relief completely.  For some businesses, the changes will not have an impact as they already meet the available/actual number of days let criteria.  However now that the introduction of the new legislation is just around the corner, owners should try to ensure they meet these new requirements in order to qualify for the remaining generous reliefs which only apply to such lettings.  These include, for example, capital gains reliefs, whereby the tax payable on sale is reduced and capital allowance claims such that certain expenditure on the property is deducted from the taxation income”.

Should you require any assistance in claiming these reliefs, please contact us.