Furnished Holiday Accomodation

It’s family holiday time and we haven chose a cottage in Wells Next the Sea, a beautiful fishing village where we could relax.  I know those with kids are thinking children-relax is an oximoron but I’m ever the optimist!  As it turns out Furnished Holiday Accommodation can be stressful from both a tax and child safety perspective.   But what pitfalls do you need to be aware of?

Tax Father Beach shot

Tax Father Beach shot

After bundling the kids in the car we enjoyed a leisurely drive with only a few emergency wee stops (my bladder isn’t what it was) and tantrums (Mrs TTFs map reading isn’t all that). It was after we arrived that the issues with temporary accommodation became evident.

Following months of Mrs TTF relocating breakable objects and making all electrical sockets inaccessible to the children (and annoyingly me) at home we were  suddenly in the holiday equivalent of the temple of doom.  Booby traps lay everywhere, sharp corners, open fires and low ovens were primed to entrap an unsupervised toddler.  We therfore had to be ever vigilent which resulted in my iPhone time being cut down drastically.

In a similar vein it is important that holiday let owners keep a close eye on their investments to ensure they enjoy maximum tax relief.

Furnished Holiday Lettings

If you meet the conditions of Furnished Holiday Lets you will be able to enjoy the following tax benefits which are usually reserved for businesses not rental properties.

  • ability to claim capital allowances on furniture, furnishings, etc. in the property
  • the availability of Capital Gains Tax (CGT) relief including Business Asset Rollover Relief, Entrepreneurs’ Relief (10% rate of tax), relief for gifts of business assets to family members
  • profits count as earnings for pension purposes.

These generous reliefs are however only available  to those properties that meet the following conditions:

The accommodation must be in furnished, located in the UK or European Economic Area (EEA) and commercially let. Accommodation is ‘furnished’ if the visitor is entitled to the use of furniture. There should be sufficient furniture provided for normal occupation.

The property must also satisfy all three of the following tests if a letting is to qualify.

1 The availability condition (availability test/threshold) – during the tax year the accommodation is available for commercial letting as holiday accommodation to the public for at least 210 days

2 The letting condition (occupancy test/threshold) – during the tax year the accommodation is commercially let as holiday accommodation to the public for at least 105 days

3 The pattern of occupation condition – the accommodation must not be let for periods of longer-term occupation for more than 155 days during the year.

All is not lost if the property does not meet these conditions in one year as there are periods of grace and averaging relief available.

As you can imagine keeping an eye on the above can be nearly as stressful as looking after children so its important to keep accurate records to demonstrate that the tests have been met.  If you want more assistance do not hesitate to contact me but for now I’m off to clear up the talcum powder explosion that Jabo (#1 son) has just detonated!

 

By Peter Cross

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