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Last updated: 6 Apr 2021
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Furnished Holiday Lets in a ‘stay at home’ society

After a year of COVID-19 restrictions, you may be concerned with whether your property met the Furnished Holiday Let (FHL) criteria for 2020/21. Thankfully there‘s legislation to relieve cases where it wasn’t possible to meet the criteria over the past 12 months.

Unlike a residential let, a FHL is a tenancy that only entitles the tenant to occupy a fully furnished, self-catering property for a limited period. FHLs have long been seen as a reliable source of income, as well as having a number of tax advantages.

Despite the phased abolition of mortgage interest deductions for rental properties, if the property is a FHL you are still permitted to deduct the full mortgage interest from your profit for each accounting period. Capital allowances are available for furniture, fixtures and equipment. In addition, Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is available on disposal of FHLs, allowing any gains to be taxed at the lower rate of 10% up to the lifetime allowance.

FHL criteria

What are the criteria for a property to qualify as a Furnished Holiday Let? 

  1. As the name suggests, the property that is being let must be furnished. 
  2. The property must be available for let as a holiday accommodation to the public for at least 210 days in a tax year (there are special rules for opening and closing years) and must actually be let out for 105 days or more. 
  3. A period of longer-term occupation (i.e. a continuous period of more than 31 days) does not count towards the 105 day letting period.
  4. If the total period of longer-term occupation exceeds 155 days, the property will not qualify. 
  5. The property must be situated in the United Kingdom or European Economic Area (EEA).
What if your lettings have been disrupted by the pandemic?

What if your lettings have been disrupted by the pandemic?

A fall in individuals going on holiday has resulted in some properties no longer satisfying the criteria to be classified as FHLs, despite what some are calling a ‘staycation boom’. If you’ve found that over the past 12 months you haven’t let your FHL property for 105 days, then you should consider the following two elections, which relieve cases where it was not possible to let the property for the required period. 

Period of Grace election

Should your property be let for less than a total of 105 days, you are able to make a so-called Period of Grace election in a tax year, to treat your FHL as though it had been let for the required period. This election is conditional on the property having met the FHL conditions in the previous year, and there being a genuine intention to have let the property as a FHL for the current year. The election can be renewed for a second year, but the Period of Grace election must be made in the first year in which the 105 day letting condition is not met. 

Averaging election 

The averaging election is available for landlords who own more than one property that qualifies as a FHL. This relief allows for a landlord to apply the letting condition to the average rate of occupancy for all the properties in the FHL business. 

Both of the elections outlined above must be made by the 31 January following the end of the tax year concerned - for the 2020/21 tax year this is 31 January 2022.

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To speak to one of our trusted advisors and understand how you could benefit from any of the aforementioned elections for the 2020/21 tax year, please fill in the form below and we will be in touch to discuss your requirements. 

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