Client set up a holiday let in July 2018.
In the first 12 months the property did not meet the criteria for FHL. Although the property was available to let for the whole of the first year and advertised widely only 60 nights were actually let. They are however likely to meet the FHL criteria in the second year.
My understanding is that although they tried to meet the FHL criteria in the first year they did not succeed in meeting the criteria therefore they cannot treat the business as a FHL. It must be taxed as L&P income so none of the costs of setting the property up, furnishing, plant and equipment etc will be allowable. Just running revenue expenses.
However if the business meets the criteria to be a FHL in the second year can all these set up costs then be brought into the FHL business and capital allowances claimed?