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New Tax Rules for Furnished Holiday Properties

December 2010

DORSET property agents Bournecoast advise that the results of the consultation on the tax rules relating to qualifying furnished holiday letting properties have now been published.

Des Simmons said “Information received from Schofields Accountants confirm that the Capital Gains Tax or Inheritance Tax rules relating to furnished holiday letting will remain the same, and the profits will still be relevant earnings for the purpose of pension contributions”.

He added, “The government have also confirmed that legislation will be enacted to effect changes across three main areas”:-

Loss Relief
Currently, losses from furnished holiday letting may be offset against other income in the year. From April 2011, losses from furnished holiday lettings may only be offset against future profits from the same furnished holiday letting business. Furnished holiday letting in the UK is treated as a separate business to furnished holiday letting of properties elsewhere in the EEA, so UK holiday letting losses will only be available against future UK holiday letting profits; and EEA holiday letting losses will only be available against future EEA holiday letting profits.

Qualifying conditions
Under the existing rules, properties must be available for letting to the public for 140 days in the year; and must actually be let for 70 days in the year, in order to qualify as furnished holiday lets. The government has confirmed that these requirements will increase, so that properties must be available for 210 days and actually let for 105 days. However, the implementation of this change will now be delayed and will only apply from April 2012.

Relief for Contents
Where furnished holiday letting properties qualify in some tax years, but do not meet the letting requirements in other tax years, the existing legislation requires that contents are treated as if they had been sold and re-acquired, which can create tax liabilities where no transactions have actually occurred. In view of the increased availability and letting requirements, there could be more taxpayers that fail to qualify in some years. We now have confirmation that, from April 2012, businesses which meet the occupancy threshold in one year will be able to elect to be treated as having met the occupancy threshold in each of the two following years, providing that they meet certain criteria in each of those two years. At present, we have no details as to the relevant criteria, but full guidance is due to be published in advance of the implementation in April 2012.

For more information, please contact Bournecoast Property Agents on 01202 437888 or via email info@bournecoast.co.uk.  This summary has been supplied by Schofields Accountants and further information can be obtained from 01202 555785 or by email julie.saunders@schofieldsonline.co.uk

Des Simmons

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Bournecoast Ltd
26 Southbourne Grove
Bournemouth
Dorset
BH6 3RA
Tel: (01202) 437 888
Fax: (01202) 437 889