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FHL ..v.. L&P rental ..v.. rent a room

Which is better from a tax perspective FHL, L&P rental or Rent a Room

Clients have converted 2 outbuildings on their land (not connected to their house) into Air BnB accommodation.

Married couple, property jointly owned, both higher rate tax payers.

Expect to rent out for over 105 days per annum

Trying to get my head which is likely to be the best way to treat the rentals from a tax perspective.

Is Rent a Room an option for this situation? The house is their PPR and the 2 units are effectively in the grounds.

Notwithstanding Rent a Room my feeling is that FHL is the best route to go. There will be more allowable expenses including capital allowances for part of the renovation work (integral features) for a FHL than compared with L&P rental in particular interest expense would be allowable and CGT entrepreneurs relief would be available.

Just wondering if I might be missing any potential advantages of treating the income as L&P rental income (not FHL)

 

 

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11th Jul 2018 17:49

RaR wouldn’t be available IMO (although admittedly that doesn’t always mean much).

I’ve a client in a similar quandary, so await the outcome with interest ...

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13th Jul 2018 13:31

anneaccountant wrote:

Just wondering if I might be missing any potential advantages of treating the income as L&P rental income (not FHL)


There's no choice is there? "Treating as" doesn't come into it.
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