Carbis Bay Holidays :: Furnished Holiday Accommodation
Inland Revenue for Tax Year for APRIL 2012/2013 and beyond - qualifying tests.
- The availability condition is that, during the relevant period, the accommodation is available for commercial letting as holiday accommodation to the public generally for at least 210 days.
- The letting condition is that, during the relevant period, the accommodation is commercially let as holiday accommodation to members of the public for at least 105 days.
- The accommodation must not be let for periods of longer term occupation for more than 155 days of a year
Inland Revenue - treatment of income
- The loss cannot be offset against the general income apportioned by owner
- The losses can be claimed against other profits of any other rental business in the same tax year; any balance remaining carried forward against first available profits.
Benefits of owning furnished holiday accommodation in the UK
- Allowances for furnishings inclusive of VAT.
- Loan interest relief.
- An effective CGT rate of 10% for gains less than £1 million or 18% if higher.
- Optional rollover relief.
- "Potentially" exempt for the treatment of inheritance tax.
For further advice, visit the Inland Revenue site and consult your Accountant.
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BACKGROUND
FURNISHED HOLIDAY ACCOMMODATION IN THE UK - AUGUST 2011 - changes
The Inland Revenue detail the rules and qualifying conditions which determine whether a property is considered as Furnished Holiday Accommodation. Full details can be obtained from the Inland Revenue website. Providing these conditions are met, holiday letting in the UK is considered as a business and therefore attracts some benefits.
Successive Governments have looked at various ways of changing the rules to comply with EU legislation and after considerable lobbying to retain benefits for holiday home owners, the current rules apply. New rules come into force for Tax Year 2012/2013 - see below
For further advice, visit the Inland Revenue site and consult your Accountant.
Inland Revenue for Tax Year ending APRIL 2011/2012 - qualifying tests.
- The availability condition is that, during the relevant period, the accommodation is available for commercial letting as holiday accommodation to the public generally for at least 140 days.
- The letting condition is that, during the relevant period, the accommodation is commercially let as holiday accommodation to members of the public for at least 70 days.
- The pattern of occupation condition is that, during the relevant period, not more than 155 days fall during periods of longer-term occupation.
Inland Revenue - treatment of income
- The loss can be offset against the general income apportioned by owner
- The losses not claimed against general income must be set first against any other profits of any other rental business in the same tax year; any balance remaining carried forward against first available profits.
Benefits of owning furnished holiday accommodation in the UK
- Allowances for furnishings inclusive of VAT.
- Loan interest relief.
- An effective CGT rate of 10% for gains less than £1 million or 18% if higher.
- Optional rollover relief.
- Potentially exempt for the treatment of inheritance tax.
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December 2009 - WITHDRAWING THE FHL RULES FROM 2010/2011
Following the Pre Budget Report delivered on the 9th December, 2009, The Chancellor has announced the following transitional changes.
Download this article for more information - Inland Revenue website PDF
Recent proposal for changes to the Furnished Holiday Letting Rules - 2009 Budget
Note: This is at Proposal Stage only, the Tourism Authorities are strongly lobbying the Government to oppose the proposals.
Under changes announced in the 2009 Budget, the furnished holiday lettings rules will be withdrawn from 6 April 2010 for Income Tax and Capital Gains Tax purposes, and from 1 April 2010 for Corporation Tax.
Further details will be given in the 2009 Pre-Budget Report, but it is intended that landlords of furnished holiday accommodation will be treated in the same way as other landlords of investment properties.
Download this article for more information
March 2010 - VISITBRITAIN'S RESPONSE TO PROPOSED FHL RULE CHANGES
Both VisitBritain and VisitEngland are very concerned that the proposed changes to the FHL tax rules will have a detrimental effect on the health of the self-catering sector in the UK.
Since the publication of the Budget statement last April, VisitBritain's Policy Unit has been meeting and talking to a range of individuals and groups, including self-catering operators, three trade associations, the Tourism Alliance, the Federation of Small Businesses, concerned parliamentarians and tourism colleagues. Their input has resulted in the preparation of a detailed response to ensure that the impact of the proposed changes to the FHL are fully understood by Government. The detailed response to the consultation was lodged with the HMRC and sent to the Secretary of State at the Department of Culture, Media and Sport. Click here for more details and to download the full response.
April 2010 - TEMPORARY REPRIEVE
According to various articles in the press, the Government has dropped the removal of tax relief on Furnished Holiday Lettings. This was one of several tax increases in the Budget, due to be enacted before Parliament was dissolved prior to the General Election on the 6th May.
The tax increases were abandoned after negotiations to fast-track the Finance Act through Parliament ahead of the General Election on the 6th May. The Conservatives had refused to sanction the fast-tracking of the legislation - unless these changes were dropped.
This will at least buy more time for political lobbying against these potentially damaging tax changes and meanwhile offers a welcome reprieve for Furnished Holiday Let Owners.
May 2010 - REPRIEVE CONFIRMED - For now !
The new Government has recognised the impact of Mr Darling's decision to repeal the FHL rules which threatened to have serious consequences for the tourism industry. In simple terms, the decision to repeal FHL rules would have meant that the Government no longer regarding operators in the self-catering holiday letting sector of the UK tourist industry as businesses for tax purposes. It would have been the only sector of the domestic tourist industry which was not regarded as a business.
One of the reasons given for the repeal was the EU's insistence that holiday homes in the EU should be eligible for the same tax advantages as those in the UK. The Treasury's proposed solution was to repeal the FHL rules for all holiday accommodation which, by their calculations, would save some £25million in tax each year. But this ignored the potential damage to the UK tourist industry of removing the business status (and the tax advantages it confers) from the UK holiday letting sector. The Tourism Alliance estimates the consequences of 10 per cent of operators withdrawing from the industry would be a cost to rural and seaside economies of £110million per year and 2,400 jobs.
The previous Government was entirely deaf to pleas to examine how the rules might be tightened rather than repealed and dealt a single response that commercial holiday letting is akin to long-term letting and, therefore, must also be treated as investment income, rather than from a trading business. This demonstrated a complete lack of understanding of the level of involvement required of those running a modern, commercial holiday home.
In announcing the new changes, the new Government declared that the rules did need to be amended to ensure that broadening their reach to the EU is 'fiscally neutral', ie, any increased drain on Treasury coffers from claims from letting property in the EU is offset by a decrease in claims from within the UK. The rules may still be changed to increase the "qualifying weeks" from 10 to 20, but this should not affect owners who successfull let their property.
The new FHL Rules have still not been finalised however there is now more open dialogue with the tourism industry which will mean the current Government will discuss whether the consequences of any future decision have been properly thought through.
June 22nd 2010 - BUDGET ANNOUCEMENT
The proposal inherited by the Government to repeal the special tax rules for furnished holiday lettings will not be implemented. Instead, the Government will consult over the summer on a proposal to ensure the tax rules meet EU legal requirements in a fiscally responsible way, by changing the eligibility thresholds and restricting the use of loss relief. Any changes will take effect from April 2011 and in the meantime the current rules continue to apply for the year 2010-11 tax year
July 2010 - FURNISHED HOLIDAY LETTINGS - CONSULTATION
The Government have released a consultation document where a review of the following proposal will be considered over a timescale of July to October 2010. The Government response will be at the end of 2010 for implementation in the 2011 Budget.
1. Increase the minimum period over which a qualifying property is available to let to the public during a year from 140 to 210 days.
2. Increase the minimum period over which a qualifying property is actually let to the public during a year from 70 days to 105 days.
3. Restrict the use of loss relief from furnished holiday lettings so it can only be set against certain income from the same business.
More Information :
Click the links below to see more information.