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Guaranteed holiday letting income

How to equate guaranteed income to days let

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Upon purchase of a furnished holiday let it is agreed, that under a guaranteed rental agreement with the owner of the site, an annual income of 5% of the cost of the unit will be paid to the owner of the unit for the first two years. It may or may not be relevant that bookings can be made either through the site owner or a national letting agency, but the availability criteria is met. However, if the property is not let for 105 days, although there is a guaranteed income, does this mean that it cannot be treated as a furnished holiday let?

(The letting income will vary depending on high season, low season etc.)

All replies will be welcome.

 

Replies (8)

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By Tax Dragon
10th Sep 2019 11:17

See also https://www.accountingweb.co.uk/any-answers/furnished-holiday-let-first-...

I'd say if it's not let, it's not let. Being paid by someone for a purpose other than occupation is, IMO, irrelevant.

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Replying to Tax Dragon:
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By goldenfawn
10th Sep 2019 11:25

Thanks, where would the income be reported on the tax return, and would any expenses be available against it?

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Replying to goldenfawn:
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By The Dullard
10th Sep 2019 13:51

Send us the tax return and we'll fill it in for you and send it straight back.

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By Accountant A
10th Sep 2019 11:53

In substance, these arrangements are a discount on the purchase price. For what that's worth.

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By chicken farmer
10th Sep 2019 12:32

We would really need to know the precise wording of the agreement. Is the 5% to be paid regardless of the level of the actual rents generated by lettings? or is it merely a 'top-up amount to bring the actual rents up to the 5% threshold?

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Replying to chicken farmer:
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By goldenfawn
11th Sep 2019 22:10

I'm probably being a bit thick here as I cannot see the difference in the two. In the first month the letting income received was slightly under the 5% and so it was topped up, however, had no rent been received the sum paid to the unit owner would have been the full 5%.

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Replying to goldenfawn:
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By Tax Dragon
12th Sep 2019 08:21

In your OP you said the top up was annual. Now you say it's monthly.

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By chicken farmer
12th Sep 2019 12:04

I think there is a considerable difference. As dragon points out this top-up to 5% of purchase price seems now to be a monthly payment so, if no rentals were received for the first 2 years of ownership of the unit, the site owner would be paying the unit owner 120% of the purchase price !! Seems like a pretty odd arrangement.

As I said previously we need to know the PRECISE terms of the agreement. I wonder whether the letting is to the site owner by way of some sort of a sub-lease and therefore is the property really a qualifying FHL anyway.

In the absence of any response I agree that 'if it ain't let, it ain't let'.

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