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FHL and occupancy condition

Would you count former owners last minute occupation?

I have a family who's parents have put their former substantial residence into a bare trust to the benefit of their children.

I prepare the trust accounts. Part of the residence is let out as a FHL and skirts around the 105 day mark occupancy as its a large property and only really suitable for family gatherings, so tends to be 1 week max, or long weekends. 

When the parents (resident elsewhere) are in the country, they sometimes use the FHL and pay rent, but not a huge sum. They sometimes use another property owned by one of the children. 

The family claim it is market rent as its only used if not already let so a "last minute" rent. I am not convinced, as they seem to stay for 2-3 weeks for the same money as received in a long weekend to joe public. 

I am minded to exclude the parents period of occupation on two grounds (a) they are not really "members of the public" but the owners parents., and  (b) its probably not commercial.  Either leg would mean it is not a FHL,  which is possibly a blessing as they have further rentals within the trust which have losses in some periods. 

Any thoughts?

[IHT I appreciate is another issue if they are not paying market rents due to reservation of benefit, leave that one for now]


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13th Oct 2017 11:23

HMRC Help sheet 253 specifies:
"Don’t count any days when you let the property to friends or relatives at zero or reduced rates as this isn’t a commercial let."

This is HMRC's guidance though...

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13th Oct 2017 11:47

@Chipette, thanks for taking the time to comment. I wasn't sure if this was in the "too stupid to give an answer too" category, or the "I don't know either" category.

I must admit I didn't think of looking at HMRC guidance, but the underlying legislation says the property must be let to "members of the public" at "commercial rates" and I was pondering if a "last minute" discount rates would be commercial, and if the trustees parents might be members of the public. Seems a bit of a stretch to me.

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13th Oct 2017 11:54

There is no "occupancy" condition.

The requirement is that for 105 days it is "commercially let AS HOLIDAY ACCOMMODATION TO MEMBERS OF THE PUBLIC".

It is dubious that it is commercially let, but even if it is, it is even more dubious that it is let AS HOLIDAY ACCOMMODATION. As you say, even more dubious still is that the parent's use constitutes letting to MEMBERS OF THE PUBLIC

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to Portia Nina Levin
13th Oct 2017 13:30

thanks PNL, that is pretty much my thoughts but its good to confirm I haven't missed some wriggle room.

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