Furnished Holiday Lets FHLs - more time to plan
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Holiday Lets (FHLs) – delay
in the consultation document - more time to plan
With all the recent
changes to the FHL rules it is difficult to become too excited about
to the proposed consultation document published in July 2010. There
however, tax planning opportunities arising from these changes.
- Increasing the period for which the property
must actually be let from 70 to 105 days – effective from 6 April 2012.
- Increasing the period for which a property must
be available for holiday lettings from 140 to 210 days a year –
effective from 6 April 2012.
- Withdrawing the ability to set holiday letting
losses against general income, and to claim terminal loss relief –
effective from 6 April 2011.
- Treating a taxpayer’s United Kingdom
and EEA lettings as two separate trades, so that losses from one cannot
be set against profits from the other.
The July proposal, to
introduce special capital allowance rules for businesses which qualify
holiday lettings in some years but not others, has been abandoned.
view of the ‘two year run-on’, alternating between qualifying and not
qualifying is likely to be much less of a problem.
The complexities of
averaging must be considered in relation to the changes. Where a
two or more such properties, an averaging claim (section 326, Income
(Trading and Other Income) Act 2005) can be made. An averaging claim
a property to count as ‘furnished holiday accommodation’ even though
for 70 days in the year. The existing rule, which allows someone who
or more properties to ‘average’ their occupancy rates, will remain in
but because the United Kingdom and EEA lettings will count as two
businesses, there will (from April 2011) have to be a separate
calculation for each.
If a business (that
is to say, a United Kingdom
holiday letting business or an EEA holiday letting business) satisfies
occupancy test in one year, it may elect to be treated as also
satisfying it for
the following two years. This will apply from April 2012. However, it
be possible to claim this ‘bought forward’ qualification for a year in
averaging relief is claimed for the same business.
With the current
rules continuing to the end of the tax years set out above, there is
scope and opportunity for individuals to ensure that their furnished
either in the UK or EEA meet the existing qualifying conditions thereby
obtaining the beneficial treatment under the current rules. Likewise a
review of qualification, averaging and capital allowances needs to take
as part of the tax planning strategy. With the capital gains tax
rollover relief, holdover relief and entrepreneurs’ relief there is
either use these reliefs or protect the availability of the reliefs
It must be remembered
that the Chancellor of the Exchequer has stated that he will make his
Budget Statement on Wednesday 23 March 2011 and publish the Finance
on Thursday 31 March 2011. However, there could be challenges to the
before it becomes an Act…the saga of “in, out, shake it all about” with
to FHL tax rules might continue some more…………
About the AuthorButler F.C.A. Butler & Co, Bennett House, The Dean, Alresford, Hampshire,
01962 735544. Email;
Julie Butler F.C.A. is the author of Tax
Farm and Land Diversification ISBN: 0754517691 (1st
ISBN: 0754522180 (2nd edition) and Equine
Tax Planning ISBN:
third edition of Tax
Planning For Farm and Land Diversification will be published
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Article Published/Sorted/Amended on Scopulus 2011-07-01 09:48:36 in Tax Articles