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TAX TIP TUESDAY: Furnished Holiday Lets – Tax Conditions You Need to Know

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

With the ever-increasing limitations being placed on buy-to-let properties, many landlords have diversified to rent out their properties as furnished holiday lets (FHL) to continue their business without the bureaucratic hassle — and get tax breaks as well.

Same property, new business

While many landlords are still keen to use their properties to turn a profit, they’re not so pleased about legislation and regulation being passed that limits their opportunity to do so. With the trend rising for travellers and tourists choosing to stay in accommodation that reminds them of home while they’re away, what better way to capitalise on your property and reap some tax relief at the same time?

What tax relief is available?

As opposed to being classed as a business, for tax purposes, a furnished holiday let is considered an income investment. As long as the FHL meets specific requirements, there are definite tax advantages in place.

The tax reliefs available are:

  • Plant and machinery capital allowances for furniture, equipment, fixtures, etc.
  • The same capital gains tax reliefs as traders benefit from, such as business asset rollover relief, entrepreneurs’ relief, relief for gifts of business assets and relief for loans to traders.

The conditions that must be met are mainly related to occupancy to differentiate it from any other letting situation

  • It must be suitably furnished to qualify as acceptable holiday accommodation
  • It needs to be let on a commercial basis with the aim of making a profit
  • It must be located within the European Economic Area.
  • The property must be available to the public for at least 210 days (30 weeks) in any given tax year and it needs to be let out for at least half that amount of time – 105 days (15 weeks).
  • Finally, continuous occupation cannot exceed 155 days and one occupant must let the property for more than 31 days in a 7 month period.

More to consider

We’ve only listed a few of the potential benefits you can enjoy as a proprietor of an FHL. However, this information is just a slice of the ins and outs you need to be aware of when considering using your property as a furnished home letting.

In order to make sure your property qualifies and will be able to work for you as an FHL and to ensure you’re taking advantage of all potential tax breaks available to you, get in touch with DMFS today. If you’re considering purchasing a property for FHL purposes, our team can help you with the mortgage process too.

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