Holiday let owners: The tax basics by AIMS Accountants for Business

/ Accounting, AIMS, Tax

Author: Johan Da Silva

Tags: Furnished Holiday Let, Holiday Let

If you are a holiday let owner you likely have heard the term Furnished Holiday Let (FHL). FHL refers to a property rented out to holidaymakers on a short-term basis, so for less than 31 consecutive days.

If you currently have a property and are considering renting it out, or already do so, you need to think about tax. Sorry, we know that no one really wants to think about tax but there’s simply no escaping it. If you are setting up a holiday let for the first time or expanding your accommodation portfolio, how do you make this process as pain-free as possible?

Firstly, there are strict rules to adhere to in order for a property to qualify as a FHL, such as:

  • The FHL must be furnished and let commercially.
  • The property must be available during the relevant period (see below) for commercial letting by members of the public as holiday accommodation, generally for 210 days or more per year. This is known as the availability condition.
  • The property must be let (ie: actually booked) as holiday accommodation to members of the public for 105 days or more per year. Excluding periods of longer-term occupation, these being continuous periods of more than 31 days during which the accommodation is in the same occupation, other than in some exceptional circumstances. This is known as the letting condition.
  • The property must not be let for periods of longer-term occupation (as defined above) for more than 155 days. This is the pattern of occupation condition.

A Furnished Holiday Let (FHL) has tax benefits over a regular rental property business, including the below.

  • Capital Gains Tax (CGT) relief on disposal.
  • Business Asset Disposal Relief – When the property is sold, gains are charged at 10% rather than 18% (or 28% for higher rate tax payers).
  • FHLs can qualify for Business Asset Rollover Relief and gift tax relief.

Additionally, FHL owners, whilst trading, can make use of capital allowances on new equipment such as beds and fridges. This means that owners can write off the full cost of such purchases against their tax liability. For a normal domestic rental property, the initial purchase of these items would be classed as capital and there would be no deduction.

Ian Hardwick, Business Development Director at eviivo, who provide award-winning software to vacation rental operators to allow them to manage guests, bookings, and online travel agencies in one simple, easy-to-use platform says:

“There’s so much to keep on top of when running an accommodation business. Not only are there the day-to-day tasks like managing bookings, welcoming guests, cleaning and property maintenance, there’s also the ongoing work involved in keeping accounts, maintaining healthy cash flow and staying on the right side of regulations. It’s really important to have the best tools for the job and working with reliable experts you can trust to make your business work for you, not the other way round”.

Working together, AIMS and eviivo make it easier for property owners to run a successful holiday let.

For more detailed tax, accounting and business advice, your local AIMS Accountant will be happy to help. We are business accountants for business people.

If you own or are considering purchasing a holiday let, visit eviivo.com to see how eviivo can help you run your business efficiently and effectively.