Earnings relating to Furnished Holiday Lettings (FHLs) are calculated using different rules compared to other lettings. If the property qualifies as FHLs it is possible to:
• Benefit from Capital Gains Tax reliefs for traders including Entrepreneurs relief
• Claim capital allowances for items such as furniture, equipment and fixtures
• Include the profits as earnings for pension purposes
Qualifying as a FHL
The following must be true:
• The property is in the UK or in the European Economic Area (EEA).
• The property is furnished sufficiently to provide normal occupation for your visitors.
• The property must be commercially let (you must intend to make a profit). If you let the property out of season to cover costs but did not make a profit, the letting will still be treated as commercial.
Accommodation can only qualify as a FHL if it passes all 3 occupancy conditions.
1. The pattern of occupation condition – If you let the property for continuous periods exceeding 31 days, and the total of these periods is more than 155 days during the year, this will not be a FHL for that tax year.
2. The availability condition – The furnished holiday accommodation must be available to let for at least 210 days in the year. If this is not the case then this will not be a FHL for that tax year.
3. The letting condition – The property must be let commercially as furnished holiday accommodation for at least 105 days in the year. If this is not the case this will not be a FHL for that tax year.
If the property is not a FHL you will be taxed based on the property lettings rules. These are investment based rules rather than trading.