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Emergency Budget: Furnished holiday lettings reprieve

22nd Jun 2010
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There was good news in for the tourism industry in the Budget, as it was announced the generous treatment of holiday lettings will continue.

There were strong indications in the run up to the Budget that one of the coalition’s promises would be good news for the tourist sector, and the Budget today included an announcement that the planned legislation included in the Finance Bill 2010 to abolish the favourable furnished holiday lettings (FHL) regime was to be itself abolished. The new legislation – included in the Finance Bill 2010 - was held back and not included in the Finance Act 2010 passed in April, as part of a pre-election deal between the parties, but the legislation had been developed and consulted on for over a year and was widely expected to be reintroduced in the Finance (No. 2) Bill 2010 due out at any time now.

However, Osborne announced that proposals to abolish the favourable tax regime would now be shelved, and that the generous treatment of holiday letting activities will continue.

HMRC has released a question and answer document indicating that while the current form of reliefs will all continue for 2010/11, there will be a consultation over the summer of 2010 to establish the appropriate treatment of furnished holiday letting activities from April 2011. There is therefore an opportunity to re-look at the reasons for abolishing the favourable regime – which was largely prompted by the requirement to extend the generous tax treatment to properties in the European Economic Area. Special rules had previously applied only to holiday lets in the UK, and there was concern that the widening of the scope might cost significant amounts of tax revenue.

The information now available indicates that the consultation would look at "a proposal" (which indicates that there is a formal proposal in mind, rather than an open consultation) which would:

  • Ensure that the FHL rules apply equally to properties in the EEA
  • Increase the number of days that qualifying properties would have to be available for, and actually let as a commercial holiday letting
  • Change the way in which FHL loss relief is given

Replies (3)

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By carnmores
22nd Jun 2010 15:12

im off for a siesta

large ones all round

Rebecca nice to hear you

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By Giles M
22nd Jun 2010 18:37

Restricting losses


I wonder if your suggestion a couple of months ago that losses would not be available on properties occupied for part of the year by the owners might be in their thinking.

I suspect we'll see a lot more 'FHL v trade' discussions after April 2011.


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Rebecca Benneyworth profile image
By Rebecca Benneyworth
22nd Jun 2010 18:48

I agree Giles

And HMRC's approach to this in the last document they released was bullish to say the least. I predict trouble ahead as it is an area where which side of the line you come will be crucial - lots will be easily one or the other but I suspect there will be a lot of argument around the margins - unfortunate for some who would prefer certainty.

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