Furnished Holiday Lets Draft Regulations
The draft regulations for Furnished Holiday Lets (FHL) has now been announced and legislation will be introduced into the Finance Act 2011. The changes to the tax law cover:
- European Economic Area (EEA) properties;
- the periods for which a property is available for let and must be let; and
- set off of losses
Generally, the changes have effect on and after 1 April 2011 for companies and 6 April 2011
for individuals and partnerships.
The increase in the number of days for which a property is actually let or available in order to qualify for FHL will have effect from 1 April 2012 and 6 April 2012 for companies and individuals (and partnerships) respectively. The law will be changed by Finance Bill 2011 so that:
- FHL in both the UK and EEA will be eligible as qualifying FHL within the (revised) special taxrules. This is the current situation but is not within the legislation;
- the minimum period over which a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days in a year with effect from April 2012;
- the minimum period over which a qualifying property is actually let to the public in the relevant period is increased from 70 days to 105 days in a year with effect from April 2012;
- losses made in a qualifying UK or EEA furnished holiday lettings business may only be set against income from the same UK or EEA furnished holiday lettings business; and
- a “period of grace” will be introduced to allow businesses that don’t continue to meet the actually let” requirement for one or two years to elect to continue to qualify throughout that period.
The changes identified within the consultation document issued back in June have been implemented much as expected, although the increase in minimum period over which a qualifying property must be available for letting and is actually let has been deferred until April 2012.
These changes to the number of days should not affect many owners established in the market, however it is a valuable deferral for those owners new to the market where a lead in of a couple of years is needed to fully establish the property. As such in order to maintain and help build the sector this date extension is helpful.
If you are interested in reading the draft regulations in full then click here.