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Furnished Holiday Lets

15th Feb 2010
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The transitional rules associated with the withdrawal of the furnished holiday letting regime will affect every owner of holiday lets, whether in the UK or elsewhere in the EEA.

Although the withdrawal of the favourable tax regime was announced in April 2009 at the Budget, it was not until the Pre Budget Report in December 2009 that the detailed rules about how the transition from deemed trading treatment to letting business would take effect.

The transitional rules included a number of expected changes, but some real surprises. Not least the treatment of the balance on a capital allowances pool as at 6 April 2010!

A broad summary of the transitional rules is as follows :

  • All favourable treatment arising from viewing furnished holiday lettings as a deemed trade end on 5 April 2010;
  • Specifically CGT rollover relief and holdover relief for gift of business assets will no longer be available;
  • A disposal of a holiday letting property might attract CGT Entrepreneur’s relief after 6 April 2010 depending on the conditions being met. The last possible date for Entrepreneurs’ Relief on a disposal is 5 April 2013
  • Losses on furnished holiday lettings will be treated as losses on a property business after 5 April 2010, and will only be available to set off against other property business profits
  • No further carry back of losses will be available
  • There will be no further additions to the capital allowances pool after 5 April 2010, but see the transitional rules for more details of what happens to the pool
  • Wear and tear allowance will also be available form 2010/11 onwards.

There are some key tax planning tips which you need to ensure that your clients are aware of – advising appropriately on the change will not take long, but could save your clients thousands of pounds in tax, so we have drawn up a special report to help you make the most of this short window of opportunity.

"Furnished Holiday Lets - stunning end game strategies" is the first of a series of Tax Essentials products which will focus on key advice areas which will save your clients money and generate fees. The publication includes a detailed explanation of all aspects of the change and highlights two particularly important planning points which you cannot afford to miss, with worked examples to show the impact of the advice you should give. There is also a letter for you to use to trigger the issue for your clients, which we hope will make it easy for you to be proactive with your advice.

Replies (4)

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By User deleted
15th Feb 2010 14:11

Of course ...

... one thing that makes planning difficult is that this legislation will be in the Finance Bill 2010, presumably.  But I'd expect this to be a pretty slim document with an election looming so maybe the draft legislation won't even make it into the Bill.  Even if it does unless the Finance Act is rushed through Parliament to clear the decks before the election, it may not have been passed by the time the Tories assume power - assuming they do.  This of course also partly depends on when the election is called.  If not passed by the time the new Government takes office then the Tories will presumably scap it, or that's a possibility because they'd either scrap it or accept it as it is surely rather than tinker with it.  It's hard to see that the position after 5 April 2010 will be less favourable than the draft legislation proposes, but it's hard to give definitive advice as we don't know if the legislation as it's drafted will make it to the statute book.  Or am I missing something?

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Nichola Ross Martin
By Nichola Ross Martin
15th Feb 2010 16:41

No you are not, but

we know how some of the existing reliefs will work, and if you are one of those FHL businesses that is very active on the additonal services front you should be able to continue to achieve trade and business asset status after the change and so not be unduly affected. For the rest, well there is always the PPR flip to consider.

Virtual Tax Assistance for accountants:

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By springacweb
16th Feb 2010 10:54

Furnished holiday letting rules

There is no provision in the rule change for those who have worked extremly hard in the tourist industry investing profits of their business to develop and bring up to date facilities such as ensuite bathrooms, swimming pools,  which holiday makers now require. They have not had funds to make pension contributions over the years but under the new provsions they are to be denied this. If they sell however, and many are reaching retirement age  they will also be denied entrepreneurs relief after 2013. This seems a poor reward for the business generated for restaurants and the holiday trade generally which the self catering holiday lets bring into a tourist area. In the South West prosperity is dependent on tourism. The self catering industry needs support at this time and separate provisons are required to distinguish those who have developed furnished holiday letting sites with multiple facilities from those who have merely invested in predeveolped units either abroad or in the UK.      

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By User deleted
16th Feb 2010 15:50

EEA Property Losses created post 06/04/2010

It's not overaly clear from the Article or the guide purchased what the tax treatment will be for EEA rental property losses created after 06/04/2010.

For losses incurred on properties outside the UK but inside the EEA, let with a commercial view to profit, will these losses be available for offset against all other profits from property letting (ie including UK profits) or only against profits of the same rental property or those outside the UK but in the EEA? Eg - can you offset Spanish rental property losses against UK rental profits?

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