FURNISHED HOLIDAY LETTINGS

The tax treatment of Furnished Holiday Lettings (FHL) has been advantageous for many years.

Provided that certain conditions are met, FHL are treated as a trade. This can be preferable to the tax regime for normal let property in a number of specific areas, as the rules and reliefs for trades are often more generous. Currently the FHL treatment potentially applies to properties in the European Economic Area (EEA) but certain conditions need to be satisfied including that the property must be: - available for letting for at least 140 days a year and - actually let for at least 70 days. Draft legislation has been issued to cover changes to FHL. However in an amendment to the original proposals the new qualifying conditions will not now take effect until April 2012. From April 2012: - the property must be available for letting for at least 210 days a year (generally the tax year) and actually let for at least 105 days. - a ‘period of grace’ will be introduced to allow businesses that do not continue to meet the ‘actually let’ requirement for one or two years to elect to continue to qualify throughout that period. From April 2011 there will be two types of FHL business; a UK FHL business consisting of properties in the UK and an EEA FHL business consisting of properties in one or more EEA states. FHL losses will only be able to be set against income from the same FHL business.