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Tax Loophole Closed On Furnished Holiday Lets

A loophole created by the Government itself ...

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Posted by Helen Beaumont on 26/01/2022 @ 8:00AM

Many landlords avoid business rates and council tax on Furnished Holiday Lets because of a loophole. This changes in England from April 2023 thanks to Secretary of State, Michael Gove ...

The Government feels that it's reasonable to tighten up the rules on Furnished Holiday Lets!

The Government feels that it's reasonable to tighten up the rules on Furnished Holiday Lets!

copyright: acceleratorhams / 123rf


These rule changes are to bring the different countries of the UK into line with each other. Although in England the change happens in 2023, Wales and Scotland make the change this year.

"The loophole was created by the Government itself!"

The tax loophole came about because of a lack of clarity around business rates and the introduction of the Small Business Rates Relief (SBRR). Furnished Holiday Lets are classed as commercial so are subject to Business Rates instead of Council Tax, however, they have a nil Business Rate tax liability due to SBRR. This was due to George Osborne expanding the scope of SBRR a few years back.

The Government feels that it's reasonable to tighten these rules up and Michael Gove, Secretary of State for Levelling Up has taken the lead on this. I just feel it's surprising that it took so long to happen.

Reforming Business Rates in their entirety would have been a better solution and I thought this was something that would have happened in the last budget, but didn't.

Under the new rules, properties will be assessed for Business Rates rather than Council Tax once the owner provides evidence that:

  • It is available for commercial letting, as self-catering accommodation, for short periods totalling at least 140 days in the year after the day in question

  • During the previous year, it was available for letting commercially, as self-catering accommodation, for short periods totalling at least 140 days

  • During the previous year, it was actually let commercially, as self-catering accommodation, for short periods totalling at least 70 days

For letting days to count, the position is taken at the end of the day, so Friday evening to Sunday morning counts as 2 days only.

Multiple units in one location do not get any special treatment so the rules only apply to the building that would normally be assessed for Council Tax. Shepherd Huts, Yurts and Caravans will generally be subject to Business Rates.

And for new Furnished Holiday Lets, they will be subject to Council Tax until they have been made available for 140 days and let out for at least 70 days.

Once the criteria are met, they can qualify for a Business Rates assessment.

Until next time ...



HELEN BEAUMONT

 
 



Would you like to know more?

If anything I've written in this blog post resonates with you and you'd like to discover more about tax on Furnished Holiday Lets, it may be a great idea to give me a call on 01908 774323 and let's see how I can help you.

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About Helen Beaumont ...

 

Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.

Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.

When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.