Furnished holiday Let (FHL)

Question 1

Requirements to qualify for Furnished Holiday Let (FHL)?

What are the three Occupancy Conditions?

Wha tif letting condition is not met?

Answer 1

Furnished
Situated in the UK or EEA, all FHL in UK taxed as single UK FHL, all EEA taxed as single EEA FHL. Cannot offset losses from one against profits on the other.
Let on a commercial basis, must intend to make a profit

PATTERN OF OCCUPATION CONDITION
May be under same occupancy for more than 31 days as long as such periods do not exceed 155 days per Tax Year.

AVAILABILITY CONDITION
Available for let minimum 210 days per year.

LETTING CONDITION
Actually let for a minimum of 105 days
Do not count days when property is let to family or friends at a zero or reduced rate
Do not count longer-term let’s of more than 31 days unless it is due to unforeseen situation.
If property not let for 105 days, may do:
An average election over multiple property
Or a period of grace election.
Can do both election at the same time.

LOSSES
Can offset losses against previous year profits so long as it is on the same FHL business (UK or EEA).

Question 2

Benefits and disadvantages of FHL?

Answer 2

ADVANTAGES
Treated as a trade and qualifies for entrepreneur’s relief
Income is classed as UK relevant earnings for pension contribution purposes
Rollover relief/ holdover relief/ loss relief available for CGT purposes.
Qualifies for BPR.
Income classed as trading income, expenses can be fully deducted from profits.
Capital allowances and losses can be claimed to reduce income tax.

Disadvantages