There are special tax rules for properties that are let out as “furnished holiday lettings”. Losses from renting out such properties can be set-off against total other income. This facility is not available for properties that do not qualify as “furnished holiday lettings” properties.
Benefits of FHLs:
If you let properties that qualify as FHLs:
- you can claim Capital Gains Tax reliefs for traders (Business Asset Rollover Relief, Entrepreneurs’ Relief, relief for gifts of business assets and relief for loans to traders)
- you are entitled to plant and machinery capital allowances for items such as furniture, equipment and fixtures
- the profits count as earnings for pension purposes
To benefit from these rules, you need to work out the profit or loss from your FHLs separately from any other rental business.
To qualify as a “furnished holiday let”, a property must be:
1. “Available” for letting for at least 210 days in the year; and
2. “Actually” let out commercially for at least 105 days or more during the year; and
3. Lets of more than 31 days do not count towards the above periods unless something unforeseen happens.
There are various other conditions that relate to or expand on the above points. The business of “furnished holiday lettings” can be made extremely tax efficient if structured correctly. For more details on how to structure a UK property portfolio tax-efficiently, please contact us.