Furnished holiday lets (FHL) accountants

What is a furnished holiday letting (FHL)?

A property rented out on a short-term basis (most commonly to tourists or holidaymakers) and is let for less than 31 consecutive days can be classified as a Furnished Holiday Let (FHL).

There are many benefits for such properties that qualify as an FHL compared to properties that are rented out on a residential basis on a long-term basis.

Qualification criteria

To qualify as a Furnished Holiday Letting property, a number of conditions must be met such as:

Location

The property must be situated in the UK or in the European Economic Area (EEA).

Availability condition

The property must be available for commercial lettings as holiday accommodation to the public for at least 210 days (30 weeks) of the tax year.

Letting Condition

Out of the 210 days, the property must be let out for at least 105 (15 weeks) days as holiday accommodation. If you let more than one property as an FHL, and one or more of these properties does not meet the letting condition of 105 days, you can elect to apply the letting condition to the average occupancy rate for all the properties you let FHLs. This is called an averaging election.

Any longer-term lets (more than 31 days) to friends or family do not count towards the 105 days if you have let the property at no cost or a discount, as all lets must be commercially let (i.e. there must be an intention to make a profit through commercial let).

In addition, the FHL must be furnished sufficiently for regular occupation.

Can any costs be deferred to the following tax year?

If you are purchasing an FHL that overlaps the change in the tax year, and the property requires maintenance work to bring them up to acceptable liveable standards (which may take eight weeks to complete), then ‘Yes’ you can.

You cannot claim any capital expenditure or costs (e.g. property extensions to the property etc.) against income. Still, they can be combined when you sell the property and offset it against Capital Gains Tax. Revenue expenditure will be allowable, and if it creates a loss, these can also be offset against future profits.

Concerning any pre-commencement trade expenditure, if this were incurred within seven years of trading, it would qualify if it was a property let when you bought it. You can add these into your calculations in the year when you commenced trading.

For example, you may not be claiming the loss in a prior tax year or even do a tax return to record those losses but then bring it forward in the tax year the trade commenced.

The FHL qualifying weeks conditions do not impact the pre-commencement revenue expenditure incurred within seven years of the trade and can be offset against revenue once the trade begins.

How we help?

Fusion Accountants provides a fully comprehensive service that covers initial review, eligibility criteria to tax planning, and tax calculation (including submissions) to clients who run Furnished Holiday letting businesses.

Our service also includes;