Furnished holiday lets

By Tolley
  • (Updated for Budget 2020)

The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Furnished holiday lets
  • UK and overseas holiday lettings
  • What is the commercial letting of an FHL?
  • Under-used holiday accommodation elections
  • Capital gains tax reliefs
  • Roll over relief
  • Gift / holdover relief
  • Loans to traders
  • Substantial shareholdings exemption
  • Losses
  • Jointly held FHLs
  • VAT and holiday accommodation

Whether or not a property qualifies as a furnished holiday let (FHL) can make an important difference to the taxation implications. In particular, the commercial letting of furnished holiday accommodation can benefit from the FHL regime.

See also Simon’s Taxes Division B6.4 and HMRC Helpsheet HS253.

UK and overseas holiday lettings

From 22 April 2009, HMRC extended the treatment of UK FHLs to those within the European Economic Area (EEA) that would qualify if they were located in the UK. This treatment was non-statutory but kept the UK in line with EU law.

The measure was put on a statutory basis by FA 2011, which means that EEA FHLs are subject to the same tax treatment as UK FHLs.

The EEA comprises the 28 states of the EU plus Iceland, Liechtenstein and Norway.

What is the commercial letting of an FHL?

An FHL is defined for income tax purposes by ITTOIA 2005, s 325 and for corporation tax purposes by CTA 2009, s 267 as a property that meets the three tests of availability, letting and pattern of occupation, as follows:
•the property must be available during the relevant period (see below), for commercial letting as holiday accommodation to the public generally for 210 days or more
•the property must actually be let commercially as holiday accommodation to members of the public, during the relevant period, for 105 days or more (excluding periods of longer-term occupation, being continuous periods of more than 31 days during which the accommodation is in the same occupation other than circumstances that are not normal), and

•the property must not be let for periods of longer-term occupation (as defined above) for more than 155 days during the relevant period

The word ‘normal’ is not given any specific definition in legislation, so the word takes its everyday meaning (ie ‘regular’ or ‘usual’). HMRC’s view is that what is ‘normal’ is interpreted by reference to the nature of the lettings intended by the owner rather than

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