Furnished Holiday Lettings Rules Under Review

The government has launched a consultation on the tax rules for furnished holiday lettings.

The consultation, which runs until 22 October, focuses on proposals to ensure that the tax rules for furnished holiday lettings (FHL) fully comply with European Union law and are better targeted at businesses that are run commercially for profit rather than for personal use.

Provided that certain conditions are met, FHL have been treated as a trade, which can bring more generous tax treatment than for normal let property in areas including some capital gains tax reliefs and capital allowances. The proposals out for consultation are:

• to increase the minimum period over which a qualifying property is available to let to the public during a year from 140 to 210 days

• to increase the minimum period over which a qualifying period is actually let to the public from 70 to 105 days a year

• to restrict the use of loss relief from FHL so that it can only be set against certain income from the same business.

With the new tax treatment planned to take effect from April 2011, FHL owners may need to review their position before the changes are introduced.

LINKS: HMRC guidance HMRC consultation document