When a property qualifies as a Furnished Holiday Letting (FHL), they become subject to special tax rules. Should it not qualify, it is simply a furnished property and subject to different tax treatment ...
If a property qualifies, then it must be:
- Available to be commercially let for 210 days in a year
- Physically let commercially for a minimum of 105 days
- Not occupied by the same person for more than 31 consecutive days for more than 155 days in any single year
In general, an FHL is treated individually, but for landlords with multiple properties, it is possible to average across them. This means a successful, fully booked let can compensate for less successful ones.
However, it's worth noting a number of updates to the FHL tax rules for 2020/21, including the period of grace election qualifying period in the face of unforeseen circumstances.
The period of grace election applies when a landlord has been unable to let the FHL for the required number of days. They must be able to show a genuine intention to let the property, so evidence of income from previous years and proof of current marketing will always help here.
Of course, the pandemic has made it very difficult to meet these conditions for Furnished Holiday Lets during the lockdown, so now HMRC has confirmed that for the 2020/21 tax year, this unforeseen circumstance can be the trigger for a period of grace election.
Remember though, if an FHL does not reach the thresholds for four consecutive years, then after two consecutive periods of grace election, it is no longer eligible to be classed as a Furnished Holiday Let.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.