News for June
New Furnished Holiday Letting rules
Changes in the 2009 Budget mean the current Furnished Holiday Lettings (FHL) rules relating to relief for losses will be scrapped from next year.
Owners of holiday homes and cottages in the UK currently enjoy numerous tax benefits, but the Budget said that these advantages will be repealed in 2010/11. However, until then the rules will be extended to other European countries.
Under the FHL rules, landlords are currently treated as though their qualifying FHL business is a trade for the following purposes:
- loss relief;
- capital allowances;
- Landlords Energy Saving Allowance (LESA);
- certain capital gains relief
- relevant earnings when calculating the maximum relief due for an individual’s pension contributions.
Those with incomes from accommodation elsewhere in the European Economic Area (EEA) could not qualify for this treatment.
The Government has now decided to repeal its FHL regulations, as they may not be compliant with European law, but until then the rules will apply to furnished holiday accommodation elsewhere in the EEA.
Qualifying conditions
Certain conditions must be met in order to qualify for the tax treatment provided under the FHL rules:
- the property must be situated in the EEA;
- the business must be carried on commercially, and with a view to a profit;
- Availability: the property must be available for commercial letting as holiday accommodation to the public for at least 140 days during the relevant 12 month period;
- Letting: the property must be commercially let as holiday accommodation to members of the public for at least 70 days during the relevant 12 month period.
- Pattern of occupation: not more than 155 days must fall during periods of longer term occupation.
In the meantime, advisers will need to check whether any clients have foreign property within the EEA that can be retrospectively brought within the FHL rules.
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