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Furnished Holiday Lettings – the Saga continues

Draft legislation has now been issued detailing the changes to the tax treatment of furnished holiday lettings. This follows a consultation over summer 2010.

In short the amended rules mean that with effect from 5 April 2011:

  • Properties within the “EEA”* will qualify for the new treatment. However, furnished holiday lettings businesses in the UK and in the EEA are to be dealt with separately so accounts will have to be drawn up for the UK business and the EEA business. Equally furnished holiday lettings are to be dealt with separately to other (non furnished holiday) lettings.
  • Losses will no longer be able to set against other income. In future any losses can only be carried forward and set against future profits of the same business.

And, with effect from 5 April 2012:

  • To qualify for the special tax treatment a property must be available for letting for at least 210 days per annum and actually let for 105 days. It is important to note that each individual property must pass these tests.
  • However it is pleasant to see that the government has acknowledged that the pattern of letting can vary from year to year. It will consequently be possible to elect that, if a property qualifies for the 210 and 105 day rules in year one, then it will also qualify for the next two years.

If your property is likely to not pass this test then please contact robinson+co as soon as possible so we can address the situation.

A word of caution however: these changes are not yet law and we still have 3 months where things may – yet again – change!

Two important tax advantages remain, however:

  • Profits and losses from a furnished holiday letting can be shared between spouses and civil partners as so desired. Other letting income must be divided 50/50 which can create a higher tax liability if one partner is a higher rate taxpayer.
  • Capital Gains Tax reliefs have not been abolished. This means that the sale of a property used for furnished holiday lettings qualifies for “Entrepreneurs Relief” and is taxable at 10% rather than 18% or 28%.

Please contact Victoria Bishop on 01900 603623 or victoriabishop@robinsonco.co.uk if you require anything further.

*The EEA comprises:
Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Republic of Ireland, Italy, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, The Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the UK.

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