The Government has just launched a consultation is on proposals to tighten up the tax rules for furnished holiday lettings (FHL).
The aim is to ensure that the UK’s FHL rules are not only fully compliant with EU law but that they are also targeted at businesses that are run commercially for profit rather than for personal use.
The proposals are to:
- Increase the minimum period over which a qualifying property is available to let to the public during a year from 140 to 210 days.
- Increase the minimum period over which a qualifying property is actually let to the public during a year from 70 days to 105 days.
- Restrict the use of loss relief from furnished holiday lettings so it can only be set against certain income from the same business.
The main effect of these measures will be to reduce the number of properties which qualify as FHLs. This will restrict both CGT roll-over and Entrepreneurs’ Relief on gains made on the disposal of letting properties. The measures will also affect the availability of Business Property Relief for Inheritance Tax purposes, although to have obtained IHT relief under the existing rules, an owner will have to demonstrate that he has been providing additional services other than just letting and maintaining the property.
In terms of Income Tax Loss Relief, relief has always been restricted where a FHL has not been let out on a commercial basis.
Small Print & Links:
Tax and holiday letting? see our Practical Tax Guide to Furnished Holdiday Letting.
Source to this item: HM Treasury FHL Consultation