If you have property that qualifies as Furnished Holiday Letting, then the main tax advantages are as follows:

• FHLs are excluded from the new rules that restrict interest relief on residential properties

• No national insurance is payable on FHL income

• FHLs are treated as business asset for capital gains tax and therefore entrepreneurs’ relief maybe available

• Profits from FHL are classed as relevant earnings for pension contributions

So it is very important that you try and qualify as a furnished holiday letting. The main conditions are:

• The property must be in the UK
• The tenants must be entitled to use the furniture for normal occupation
• The letting must be carried out on a commercial basis
• There are also the following 3 occupation conditions:
  • The property must be available as holiday accommodation for at least 210 days
  • If the total of all longer-term lettings is more than 155 days in a year then the property will no longer qualify as a FHL
  • The property must actually be occupied by the public for at least 105 days in the year

If you have more than 1 FHL then you may have the opportunity to make an election to average the rate of occupancy for all the FHLs. This may be used where one property falls short of the requirements but the other properties meet the requirements

If a property met the conditions as a FHL in the previous year but failed to do so in the current year then there may be the opportunity to make a period of grace election if there was a genuine intention to let the property

This can be a complex area and I would be more than happy to discuss any questions you may have. Please feel free to contact me by sending an email to kevin@kwaccounting.com