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Last updated: 28 Jun 2022
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Furnished Holiday Lets in a post COVID-19 society

After two years of on and off COVID-19 restrictions, you may be concerned that your Furnished Holiday Let (FHL) does not meet the qualifying criteria. Thankfully, there’s legislation available to enable you to still qualify, which we’ve highlighted in this article.

It’s important to make sure your FHL still qualifies as such, due to the significant tax advantages dependent on meeting the conditions. Despite the phased abolition of mortgage interest relief for rental properties, FHLs are still able to deduct the full interest payable from profits. Furthermore, capital allowances for furniture and fixtures are available as is Business Asset Disposal Relief (BADR) upon sale, meaning any gains can be taxed at the lower rate of 10%, up to the lifetime allowance.

There are a number of criteria that must be met to qualify as an FHL, as detailed below:

  1. The property must be furnished.
  2. The property must be available to let for at least 210 days in the tax year. 
  3. The property must actually be let as furnished holiday accommodation for at least 105 days. Any period of longer term occupation (defined as 31 days or more) does not count towards days let.
  4. If the total period of longer term occupation exceeds 155 days, the property is automatically disqualified.
  5. The property must be situated in the UK or EEA.

During COVID-19, there was a slump in hospitality making it very difficult to meet the letting conditions.. However, two elections are available to help relieve this difficulty.

About the author

Akin Coker

+44 (0)20 7556 1332
cokera@buzzacott.co.uk

It’s important to make sure your FHL still qualifies as such, due to the significant tax advantages dependent on meeting the conditions. Despite the phased abolition of mortgage interest relief for rental properties, FHLs are still able to deduct the full interest payable from profits. Furthermore, capital allowances for furniture and fixtures are available as is Business Asset Disposal Relief (BADR) upon sale, meaning any gains can be taxed at the lower rate of 10%, up to the lifetime allowance.

There are a number of criteria that must be met to qualify as an FHL, as detailed below:

  1. The property must be furnished.
  2. The property must be available to let for at least 210 days in the tax year. 
  3. The property must actually be let as furnished holiday accommodation for at least 105 days. Any period of longer term occupation (defined as 31 days or more) does not count towards days let.
  4. If the total period of longer term occupation exceeds 155 days, the property is automatically disqualified.
  5. The property must be situated in the UK or EEA.

During COVID-19, there was a slump in hospitality making it very difficult to meet the letting conditions.. However, two elections are available to help relieve this difficulty.

Period of Grace election

Period of Grace election

If you have failed to let your property for 105 days, you can make a Period of Grace election to treat your property as though it was let for the 105 days. To do so, your property must have qualified as an FHL in the previous year, and you must have a genuine intention to meet the 105 days in the current year. This election can be renewed for a second year, but the initial election must be made in the first year of failing to meet the letting condition. 

For example, if the property qualified as an FHL in 2019/20 but did not meet the letting condition for 2020/21, you must make a valid  election for 2020/21 before making an election for 2021/22. The good news is that you have up to 31 January 2023 to amend your 2020/21 tax return to include the election if needed.

Avergaing election

Averaging election

The averaging election is available for landlords who let more than one property as an FHL where one or more such properties does not meet the letting condition of 105 days. The election allows you to take the average number of let days and apply it to all properties, so that they all meet the letting condition.

Deadlines for making an election for 2021/22

Deadlines for making an election for 2021/22

Both the Period of Grace and Averaging elections must be made on or before the first anniversary of the normal self-assessment filing date of the tax year concerned – for the 2021/22 tax year this is 31 January 2024.

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To speak to one of our trusted advisers and understand how you could benefit from these elections for your FHL, please fill in the form below and we will be in touch to discuss your requirements and how we can help.

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