Preserving FHL status for 2020/21
Newsletter issue - October 2021
A qualifying furnished holiday let (FHL) enjoys a number of favourable tax breaks - including business asset disposal relief, and the ability to claim capital allowances and rollover relief - when compared with non-qualifying properties.
FHL status is subject to occupancy conditions. The main two rules are that the property must be available for occupation as furnished holiday accommodation letting for at least 210 days in the year, and that it must actually be let commercially as furnished holiday accommodation to the public for at least 105 days in the year. There are further rules regarding longer-term lettings, but we are not considering those here. The tests generally apply for the tax year but can be applied to a different 12-month period for new lets, or ones that cease part-way through a tax year.
In 2020/21, owners of holiday accommodation were hit by COVID-19 lockdown restrictions, meaning that many will not meet the occupancy tests. This could cause a loss of FHL status. An averaging election is unlikely to help, as the restrictions will have affected all properties. However, a period of grace election could preserve the status.
The election simply treats a non-qualifying year as a qualifying year, preserving the entitlement to the various tax breaks. It can be made if there was a genuine intent to meet the conditions. However, an election cannot be made if there has never been a year where the conditions were met - so it won't help new FHL landlords. Once a period of grace of election is made, a further election can be made for the subsequent year, but after that the property must meet the conditions or it will lose its FHL status.
The election can be made on the tax return for the relevant year, or it can be made by writing to HMRC, e.g. where the return has already been filed.
BLOG POSTS
Posted on Mon, 3 Aug 2015
Posted on Mon, 3 Aug 2015
Posted on Wed, 29 Jul 2015
TWITTER
Tweets by @OWSupportLATEST TAX TIPS AND NEWS
Cuts to National Insurance contributions and the abolition of so-called ‘non-dom’ tax breaks were among the headline announcements in the...
You‘ve probably digested the main news by now from the Spring Budget. Now comes the next stage: the Spring Finance Bill. The bill was published...
You may have seen somewhat of a furore breaking out in the media towards the end of the month, as HMRC announced its tax helpline would shut down for...
We‘ve seen plenty of speculation before the last two Budgets that Inheritance Tax would see major reforms. Yet nothing materialised. And the...
Funerals that are broadcast online for well-wishers unable to attend in person are becoming exempt from VAT. During the COVID pandemic, streaming...
Q: I’m a property owner, and I’m considering renting one of my houses out for people to use for vacations. What are the tax rules I need...
New tax year begins; new tax codes take effect....