Owners of furnished holiday letting (FHL) properties are reminded that new rules come into effect in April 2012 for which preparations should now be underway.
The important changes relate to the actual letting of the property, which from April will put new demands on FHL owners.
- The FHL property will have to be available for letting for no fewer than 210 days per year (currently this is 140 days); and
- The accommodation will have to have been let for at least 105 days (currently this is 70 days).
In practice, these rules mean that where a property is in a holiday area where the ‘shoulder season’ offers only weak letting potential, every effort should be made to make sure that it is as fully let as possible during the high season.
Where appropriate, consideration should be given to opening the FHL property for letting at Christmas and Easter if you do not already do so.
Where the property is available for letting but the owner has been unable to achieve the required level of letting despite a genuine attempt to do so, the property can continue to be treated as an FHL provided that an election to do so is made and the property qualified in the prior tax year. The election can be made for two years only.
Where a number of FHLs are owned, an election can be made to apply the occupancy rules on an ‘average’ basis. This average must be calculated separately for UK based and non-UK based FHLs.
Since April 2011, losses on FHL businesses have only been available to be set against profits on the same business.