This mini-guide summarises the changes introduced to the  Furnished Holiday Letting regime by the 2011 Finance Act.

From 6 April 2011

  • The Furnished Holiday Letting (FHL) regime is now extended by statute to include property located in the European Ecconomic Area (EEA).
  • The EEA includes Iceland, Liechtenstein and Norway.
  • The profits and losses of all FHL properties in the UK are taxed as a business.
  • The profits and losses of FHL properties located in the EEA are taxed as a separate business to those in the UK.
  • The profits or losses of a UK or EEA FHL business may not be offset: each business is reported separately under self-assessment. 
  • Losses may be carried forward even if the FHL tests are not met in three years.
  • "Sideways" loss relief ends: a loss made in a qualifying UK or EEA FHL business may only be set against income from the same UK or EEA FHL business.
  • Terminal loss relief on cessation of a FHL business ends.
  • Under Averaging a FHL business of two or more properties may average the number of days that all properties are actually let in order to pass the FHL tests.
  • Under new "Period of Grace" provisions, where a property fails to meet the actual occupancy test, then provided that a property qualified as a FHL in one year, it may be deemed to qualify as a FHL for up to two following years. The owner must demonstrate that it was marketed and made available for letting.
  • The Averaging and Period of Grace tests may be combined.

From 6 April 2012

  • The minimum period over which a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days in a year with effect from April 2012.
  • The minimum period over which a qualifying property is actually let to the public in the relevant period is increased from 70 days to 105 days in a year with effect from April 2012.

More...for examples of the new reliefs, losses, capital allowances, CGT and IHT issues see Furnished Holiday Letting.