A commercial letting of furnished holiday accommodation is treated as a trade for all purposes (section 65, CTA 2010).
A letting is of furnished holiday accommodation if the following conditions are satisfied:
- The property is situated in the UK or the European Economic Area.
- The business is carried on commercially and with a view to a profit.
- The total periods of "longer term occupation" of the property do not exceed 155 days during the relevant accounting period. A period of "longer term occupation" is a letting to the same person for longer than 31 continuous days.
- The property is available for commercial letting as holiday accommodation to the public for at least 140 days during the relevant accounting period (currently – see below for changes to be made for 2012/13 tax year).
- The property is commercially let as holiday accommodation to members of the public for at least 70 days during the relevant accounting period(currently – see below for changes to be made for 2012/13 tax year). A letting for a period of "longer term occupation" is not a letting as holiday accommodation for the purposes of this condition.
On 27 July 2010, HM Treasury and HMRC issued a consultation document proposing changes to the taxation of furnished holiday lettings, as announced as part of the June 2010 Budget .
The proposals include that the period for which a furnished holiday letting is available to let, and is actually let, to the public each year is to be increased (from 140 days to 210 days and from 70 days to 105 days respectively).
Loss relief from a furnished holiday lettings business is also to be restricted so that it can only be set against income from the same business.
On 9 December 2010, HM Treasury published a summary of responses to its consultation, alongside draft Finance Bill 2011 clauses reflecting the government's revised proposals.
The government is proceeding with its proposal to extend the minimum periods for which an FHL must be:
- Available for letting to the public each year (the availability threshold) from 140 days (20 weeks) to 210 days (30 weeks); and
- Actually let to the public each year (the occupancy threshold) from 70 days (10 weeks) to 105 days (15 weeks).
However, these increases will take effect from April 2012 rather than April 2011 as originally suggested. This means that, for individuals and partnerships, the new thresholds will apply from the start of the 2012-13 tax year, and for companies, for accounting periods beginning on or after 1 April 2012.
The increases in the availability and occupancy thresholds are intended to ensure that only those persons running FHLs as a commercial business benefit from the favourable tax treatment offered by the FHL regime.
Please contact your nearest office for further information.