Furnished holiday lettings

Capital Allowances are available to UK taxpayers who own furnished holiday lettings ('FHL's') in the UK and the EEA (from April 2009).

Qualifying properties
Holiday LettingsIn order to qualify as an FHL a property must be:

  • owned by a UK tax payer
  • let on a commercial basis
  • furnished so guests can be accommodated without the need for additional furnishings
  • available to let for a minimum of 210 days a year (was 140 days)
  • let for a minimum of 105 days a year (was 70 days)
  • individual lets of no more than 31 days at a time to the same person

EEA properties
From April 2009 UK taxpayers can claim Capital Allowances on FHL's owned in the EEA.
However, FHL's in the EEA and UK are ring fenced for tax purposes preventing EEA FHL losses being surrendered to offset profits on UK FHL's and vice versa.
Note - countries within the EEA have a different tax regime than the UK. Taxpayers may have to pay both foreign and UK tax on their EEA FHL profits although double taxation agreements may be place.

Other points to consider
HMRC have introduced averaging and periods of grace to allow the occupancy threshold to be satisfied wherby taxpayers can elect that their properties continue to qualify for FHL treatment.
The legislation is detailed and outside the scope of this brief note but please contact us for further details.
E.g. in a portfolio of 3 UK FHL's, properties 1 and 2 were let for 115 days each and property 3 was let for 100 days. At first glance, property 3 fails the 105 days rule but since the average days let was 110 all 3 properties qualify as FHL's.