A property that is rented out on a short term basis (most commonly to tourists or holiday makers), i.e. let for less than 31 consecutive days can be classified as a Furnished Holiday Let (FHL).
There are many benefits for such properties that qualify as an FHL compared to properties that are rented out on residential basis on a long term basis.
To qualify as a Furnished Holiday letting property, a number of conditions must be met such as:
.The property must be situated in the UK or in the European Economic Area (EEA)
The property must be available for commercial lettings as a holiday accommodation to the public for at least 210 days (30 weeks) of the tax year.
Out of the 210 days, the property must be let out for at least 105 (15 weeks) days as holiday accommodation. Note that this test can also be met by making an election to average period of occupation of any or all of the furnished holiday lettings owned by the tax payer.
Any longer term lets (more than 31 days) to friends or family is NOT COUNTED towards the 105 days as all lets must be commercially let (i.e. there must be a INTENTION to make profit through commercial let).
In addition the FHL must be furnished sufficiently for a normal occupation.
There are lots of tax advantages for Furnished Holiday lettings such as:
.This is particularly useful where FHL properties are run as Sole Trader business rather than through a Limited Company. If you have incurred significant losses kitting up your property then these losses can be offset against other personal income to reduce to you tax.
The property must be available for commercial lettings as a holiday accommodation to the public for at least 210 days (30 weeks) of the tax year.
Perhaps one of the most useful and commonly used relief. The Entrepreneurs relief allows the business owner to pay a flat 10% tax on the chargeable Capital Gains as compared to Capital Gains tax of up to 28% that may applicable on non FHL properties.
If you gift your business assets to anyone then Gift Hold over relief can be claimed. This mean don’t have to pay the Capital Gains Tax when giving away the property, instead the tax is deferred until the property is subsequently sold by the person receiving the gift.
Unlike residential rental properties that no longer attract Capital allowances, FHL properties allow you Capital Allowances for the cost incurred to furnish the property. This helps further reduce your taxable profits and hence reduce your tax bill.
Instead of paying Council Tax, as your property will now be considered a Business property, it will instead incur Business Rates. Given the general location of the FHL properties, you will almost always end up paying less in Business rates than council tax.
And many more benefits…..
Tax Planning and Advice throughout the year to ensure you make the most of the tax releifs available to help minimise tax
Award winning accounting software to help reduce your admin burden of managing you FHL property portfolio
Personal Tax Returns calculation & submission
Comprehensive Limited Company accounting service (if you are running your FHL through Ltd Company)
Fusion Accountants provides a fully comprehensive service to its clients with Furnished Holiday letting businesses from initial review, eligibility criteria to tax planning and calculation of tax (including submissions).
Our service comes with;
Dedicated Accountant with specialism in FHL property to help you with assessment and planning
Monthly / Yearly accounts to help you understand you business financial performance and position
