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.
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.