Furnished Holiday Lettings

12th Apr 2012

Furnished Holiday Lettings

If you let out a furnished holiday home in the UK or the European Economic Area (EEA), you may be entitled to certain tax advantages. However, your property must satisfy some tests to qualify. 
What are furnished holiday lettings ?
To make sure your property qualifies, it must be:
·         in the UK or EEA;
·         furnished;
·         available for commercial letting to the public, as holiday accommodation, for at least 140 days a year up to 5 April 2012 and 210 days a year from 6 April 2012;
·         actually let for 105 days in the year (70 days before 6 April 2012);  the rent must be charged at market rate and not at cheap rates to friends and family.
Advantages of furnished holiday lettings
The tax advantages if your property qualifies as a furnished holiday letting are:
·         you can claim capital allowances
·         you get the benefit of some favourable Capital Gains Tax rules when you sell or 'otherwise dispose' of the property
Working out your taxable profit or loss
Your profit on furnished holiday lettings is worked out in a similar way as for other rental income. Examples of expenses that qualify for capital allowances include the cost of furnishings and furniture, and equipment such as refrigerators and washing machines.
If you make a loss
You can carry a loss forward and offset it against future letting profits.
If you sell or 'otherwise dispose' of the property
You may be able to take advantage of Capital Gains Tax reliefs, such as 'Business Asset Roll-Over Relief' and ‘Entrepreneur’s Relief’. These reliefs may reduce or defer the tax.
What paperwork do you need to keep?
In order to be able to complete your tax return you need to keep:
·         a note of all the rent you receive and the dates you rent out the property
·         a record of your business expneses
·         invoices and bank statements
·         all these records for six years after the tax year concerned.
This is a broad guide to the rules. Specific advice should be sought in relation to your own circumstances. Emma Glover, Tax Partner can be contacted on 0191 411 2468 or emma.glover@rowlandsaccountants.co.uk

Author: Emma Glover (Emma.glover@rowlandsaccountants.co.uk)

« Back to Article List