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Furnished Holiday Lettings- Extended tax saving opportunities

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14 April 2010
Tax saving opportunities have arisen for Furnished Holiday Lettings (FHL) owners because the Government’s planned changes have been abandoned (for now).

What changes were due from 6 April 2010?
The 2009 Budget announced the repeal of the FHL rules from 6 April 2010. This would have meant that FHLs would be treated in the same way as any other property letting for Income Tax and Capital Gains Tax purposes. The current tax advantages include:

  • Business Property Relief for Inheritance Tax purposes;
  • the ability to offset losses against other income;
  • the ability to claim Entrepreneurs’ Relief and pay a reduced rate of 10% Capital Gains Tax
  • Business Asset Roll-Over Relief for Capital Gains Tax.

Why haven’t the changes been made?
The changes were included in the 2010 Finance Bill. But due to the calling of the election and the dissolution of Parliament there was a need to rush the Bill through. This was one of the clauses that was dropped prior to the 2010 Finance Act receiving Royal Assent on 8 April 2010.

Will the changes ever be made?
If Labour win the election the changes will be re-introduced to a second Finance Bill at the start of the new Parliament.

So far we haven’t heard what the Conservatives would do if they won the election. However in a recent letter from George Osbourne’s office (before the changes were abandoned) they said that they would seek to undo the damage of the policy.

How can you benefit from the abandoned changes?
If you let a UK or EEA holiday home out on a short term basis and are liable to pay UK tax you can save tax by using the FHL rules.

Generally to make sure your property counts as a holiday letting, it must be:

  • in the EEA
  • furnished
  • available for commercial letting to the public, as holiday accommodation, for at least 140 days a year
  • commercially let as holiday accommodation for at least 70 days a year (the rent must be charged at market rate - not at cheap rates to friends and family)

What next?
If you have a furnished holiday property contact us on tax@hazlewoods.co.uk to make sure you are making the most of the FHL rules.