Furnished Holiday Let

2 years spent preparing as FHL before actually letting, does this affect FHL status?

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Client purchased property in Nov 2019 with the intention to let as FHL. Spent £47k to 5th April 2021. Did not do accounts of the property and did not file self assessment return for 5th April 2020 or 5th April 2021 (didn't have to) and has not made a period of grace election for 5th April 2020 nor 5th April 2021. A period of grace election can be made for 5th April 2021 in writing by 31st January 2023 and I can do this however my question is what happens to any spend incurred up to 5th April 2020 when without a period of grace election (out of time) the property cannot be a FHL. Does this mean that any costs incurred up to 5th April 2020 cannot be included in the overall claim for costs?  

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By Wanderer
25th Jan 2023 00:52

Can you make a period of grace election on a property for a period before the letting starts?
https://www.legislation.gov.uk/ukpga/2005/5/section/326A

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By ireallyshouldknowthisbut
25th Jan 2023 10:44

Sounds like pretrading costs?

Or has the client being using it all this time? And its really all private?

Doesn't sound like a commercial activity if taking that long to get it out on the market but i guess it depends if its a wreck undergoing a massive refurb or a perfectly usable house (which they and their friends use) they are furnishing and thinking vaguely of letting out and wondered if they could get tax relief on it.

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Replying to ireallyshouldknowthisbut:
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By davebrown123
25th Jan 2023 11:27

Client says it just took a while to setup, it has been setup as a high end let and he hasn't lived in it as he has another property which is his home. I cannot find out whether I can simply declare this as let from 1st April 2021 and bring in the costs incurred and capital allowances etc in the 21/21 return or whether HMRC would look at this from purchase and would have expected a period of grace election? This cannot now be done for the 19-20 year and on that basis would that mean that the expenditure in that year could not be claimed even though the property is now being let as a FHL? Thanks

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Replying to davebrown123:
By Ruddles
25th Jan 2023 11:42

As indicated above, the period of grace election is not relevant here - it exists to cater for cases where a property qualifies as FHL but subsequently does not meet the conditions.

The property should be declared as let when the letting business commenced (assuming that the client had no other properties already let) with expenditure up to that point treated as pre-trading' expenditure and treated as incurred on the first day of letting.

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By CJaneH
25th Jan 2023 12:26

£47,000 is very large for pre-trading expenses, sounds like it mostly capital expenses. Need to analyse between 1-Improvement to property, 2-Equipment for which capital allowance can be claimed, 3- Pre-trading expenses. Also check for personal expenses.

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DougScott
By Dougscott
26th Jan 2023 10:00

An FHL starts on the first day it is let commercially and has to be let for at least 15 weeks by the first anniversary date to qualify as an FHL. Capital allowances can be claimed on pre-trading costs of fixtures and fittings (ie. electrical systems, plumbing systems, drainage systems, heating systems, fitted units including kitchens and bathrooms) and also furniture and equipment. Typically this can add up to 20-25% of the overall value of a property. A proportionate deduction must be made for any private use of the FHL in the first and subsequent years of trading - both to revenue and capital costs.

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