If you let out a Furnished Holiday Home in the UK or elsewhere in the European Economic Area, your rental income may have some tax advantages from other rental income.
Robyn Hughes tax director at HSJ Accountants looks at the tax advantages and the new changing rules.
- Entitlement to claim capital allowances on plant and machinery such as furniture, furnishings that can be used inside the property as well as outside such as van and tools.
- Furnished Holiday Lets are treated as trades for tax purposes so you can claim taxes such as capital gains tax relief, entrepreneurs relief, relief for gifts as business assets and relief for loans to traders.
- Any profits count as earning for pension purposes.
However, your property must keep to some rules known as ‘qualifying tests’ and these rules have already changed for this tax year 2011/12 and more changes are planned for 2012/13.
Rules for furnished Holiday Lettings
To make sure your property qualifies as Furnished Holiday Letting, it must be:
- In the UK or European Economic Area.
- Available for commercial letting to the public, as holiday accommodation, for at least 140 days a year, from 2012-13 this will rise to 210 days a year.
- Commercially let as a holiday accommodation for at least 70 days a year (rising to 105 days in 2012-13). The rent must be charged at market rate, i.e. with a view to making a profit and not at cheap rates to friends and family.
- The property must not be let for periods of long term occupation for more than 155 days during any tax year.
If your property doesn’t qualify
If you property doesn’t qualify as a Furnished Holiday Letting, you will be taxed under the Residential Property Lettings rules.
This is a brief summary of the changing rules for Furnished Holiday Lets if you have rental property why not come and chat with us about your tax situation and make sure you claim as much as you can.
You can contact our tax team by emailing firstname.lastname@example.org or calling 0845 365 1000.