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Furnished Holiday Lets

In recent months there have been numerous changes to the tax payable on buy to let properties, not going in favour of the homeowners.

Therefore, more and more people are changing their properties to a furnished holiday let (FHL) which seem to be the more tax efficient alternative to buy-to-let properties due to several tax benefits. 

For a property to qualify as a FHL it must fill the following criteria:

* Be in the UK or in the European Economic Area

* There must be enough furniture provided for normal occupation and visitors must be entitled to use it

Meet all three of the occupancy tests, as detailed below:

* The total of lettings must not exceed 31 continuous days over more than 155 days during a year

* The property must be available for letting as furnished holiday accommodation for at least 210 days in the year (this can not include days when you are staying at the property)

* You must let the property commercially as a furnished holiday property for at least 105 days in the year. Friends and relatives who get a reduced rate or do not pay cannot be counted in these days.

The advantages of owning a FHL are being able to claim capital allowance, being able to make pension contributions from the ‘relevant earnings’ and one of the biggest bonuses now is that the mortgage interest can all be claimed unlike on residential properties where there are restrictions.

There are also benefits when you come to sell your property in that there is potential to claim Entrepreneurs relief, roll-over relief and hold-over relief. You can also apportion your profit of sale to everyone’s beneficial interest in the property by reference to the actual work done in letting the property (there must be sufficient evidence for this).

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