Furnished holiday lettings

The qualifying conditions to obtain the tax benefits afforded to those who let furnished holiday accommodation will change from 6 April 2011.  These benefits include: 

  • income treated as pensionable earnings;
  • income tax sideways loss relief;
  • capital allowances for new expenditure;
  • capital gains tax entrepreneurs' relief;
  • business assets roll-over relief;
  • relief for gifts of business assets; and
  • exemptions for disposals of shares by companies with a substantial shareholding.

The changes from April 2011 are as follows: 

  • Furnished holiday lettings in both the UK and EEA are eligible to qualify as qualifying furnished holiday lettings within the special tax rules;
  • The minimum period over which a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days in a year;
  • The minimum period over which a qualifying property is actually let to the public in the relevant period is increased from 70 days to 105 days in a year;
  • If a previously qualifying property fails to meet the letting condition of 105 days, there will be a facility to make a "period of grace" election so that the property may still qualify for furnished holiday letting reliefs for up to two years.
  • Losses made in a qualifying UK or EEA furnished holiday lettings business may only be set against income from the same furnished holiday lettings business.

In future, the furnished holiday letting season might typically need to span the period 1 April to 31 October in order to meet the 210 day test and the property would have to be let for 50% of that time (15 weeks out of 30) to meet the 105 day test.

There is still time before 5 April 2011 to take advantage of the business reliefs available for capital gains tax for disposal of the business within the family.

If you are considering transferring your holiday furnished letting or want more information about reliefs available to you, please contact your usual Littlejohn tax adviser or email tax@littlejohnllp.com

 

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Year End Strategies 2010/11

Disclaimer:
This guide is prepared as a general guide only. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. Always seek professional advice before acting.