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FHL - swapping in and out

Whether a property qualifies as FHL is a question of fact which is decided on a year-by-year basis.

What concerns me is whether you are compelled to declare the property under FHL rules if it so qualifies in a year, or whether you get the choice to dis-apply the FHL rules, conveniently "forget" that it qualifies, and treat it ias general property income.

It seems to me that, if available, the opportunity to dis-apply FHL rules might be beneficial where the FHL property gives rise to a loss but there is other income from (non-FHL) property against which the loss could be relieved, but only if the income forms part of the non-FHL property business.

My questions are therefore (1) do you get a choice, where qualifying conditions are met, and (2) are there any disadvantages to exercising that choice in the circumstances outlined above?  In future years it would revert to FHL status, for at least a full year prior to disposal.  I appreciate that there may be complications in the Capital Allowances comp.

My reading of the legislation is that you don't get the choice, but that if it qualifies as FHL then FHL it is.  In some respects this seems counter-intuitive, but I thought to check with you lot.

With kind regards

Clint Westwood


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22nd Dec 2012 18:29

tax planning

I believe the FHL thing is an election you make tax year by tax year, just going out to the pub so can't look through manuals to get the exact bit of legislation.

I am using this as part of tax planning where clients have other properties, exactly as you have suggested.  So it had better be right!

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23rd Dec 2012 11:29

Interesting, thanks

I could not find any reference in Chapter 6, IT(TOI)A 2005 (sections 322 to 328B) to an election.  It was this that led me to the preliminary conclusion that treatment as FHL was either prescribed or proscribed, albeit by reference to each tax year in isolation.  If you can expand it would be very helpful.


With kind regards

Clint Westwood

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23rd Dec 2012 16:36

Miss the qualifying conditions

I think it is necessary to miss the qualifying conditions to do this loss offset, I had it in my mind that it was an election but the client I've done this on has missed the occupancy test.

However, the conditions are pretty strict now and the onus would be on HMRC to prove a property had met them all which I think is a pretty remote risk.

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19th Jan 2013 17:09

Try   in  particular page 4 Period of Grace 

Also but subject to above see foot 'non-qaulifying years 


And more generally

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