Owners of Furnished Holiday Lets (FHL) property may like to consider the following planning points:
1. Loss relief
The ability to set off losses from FHL trading was severely restricted on 5 April 2011. From that date the set off of FHL losses against other income of FHL property business owners was stopped. In future losses have to be set off against income from the same FHL business.
2. Capital Allowances
Qualifying FHL refurbishment costs qualify for capital allowances including the Annual Investment Allowance. Until 5 April 2012 (31 March 2012 for companies) owners can claim up to £100,000. This reduces to £25,000 from 6 April 2012 for income tax payers and 1 April 2012 for companies.
3. Qualifying conditions
From the end of the current tax year, 5 April 2012, the letting criteria that qualifies a property as a furnished holiday let, is to change:
- The property must be let for for an annual minimum of 105 days (increased from 70 days) and
- The property should be available to let for no less than 210 days a year (increased from 140 days).
Relevant property owners therefore may need to take a look at their bookings strategy for 2012-13 to ensure they stay within the qualifying conditions.
4. Capital Gains Tax
At present FHL property owners should be able to claim Entrepreneurs’ Relief when they sell as long as the various qualifying conditions for that relief have been met. If you are going to struggle to meet the increased letting criteria set out in 3 above, and you were already considering a sale of the property, a completed disposal before 6 April 2012 (individuals), 1 April 2012 (companies) may be advisable.
Please call if you would like more information regarding any of the planning issues raised.
Sue Stephens
Tax Manager
