There have been a number of changes made to the FHL legislation recently, and these are summarised below:
Foreign property
For 2011/12 and later tax years property situated in an EEA Member State will qualify for FHL treatment, with all such properties bring pooled.
Losses
One of the main changes is the ability to relieve losses. These can now only be deducted from FHL profits in the same period, with the excess then being carried forward to offset against future FHL profits.
If property is owned in the UK and the EEA they are pooled separately, and the losses from each pool can only be carried forward against income from that same group of properties.
Qualifying days
The qualifying days conditions are being amended from 6 April 2012 as follows:
- The property must be let or available to let for 210 days in the year (increased from 140).
- The property must actually be let for 105 days (increased from 70 days).
- The property cannot be let to the same person for more than 31 consecutive days for 155 days during the year (unchanged).
Election
A letting business that meets the ‘105 day’ condition in one year can elect for them to be treated as met in the following two years. The election needs to be made in the first tax year in which the letting conditions are not met, and it cannot be made in the second year if it was not made for the first.
In order to elect for this ‘period of grace’ the property must meet the 210 day condition.
Furthermore, the 105 days can be calculated on an average basis providing the property meets the 210 day condition. From April 2011 the averaging can only be done with properties in the same pool.
If you would like an example of how this relief works in practice or if you would like to discuss your own situation in more detail please give me a call.
Sue Stephens
Tax Manager
