Following an announcement by HMRC, the special Furnished Holiday Lettings’ treatment will continue for self-catering holiday lets, subject to amendments to the rules, and this will be welcomed by the tourism sector according to a leading business adviser.
 
Martin Edhouse, a tax consultant with leading chartered accountants Francis Clark said: “This week (July 27) HMRC and the Treasury issued a joint consultation on their detailed proposals for the reform of the Furnished Holiday Lettings (FHL) rules.
 
“The previous Government announced the withdrawal, from April 2010, of these special rules allowing commercial, holiday letting businesses, within the European area, to be taxed as a trade rather than a rental business. The withdrawal of this treatment would have had a significant adverse impact on many businesses offering self-catering holiday accommodation.
 
“The new Government promised to consult on the future of the FHL rules. This latest document puts forward, in outline, proposals for amending the current rules so that the special status of qualifying letting can continue, particularly protecting the beneficial capital gains tax treatment.”
 
The main changes proposed to the current rules, which are to take effect from April 2011, are that to qualify as a FHL a property must be:
 

• available for letting for at least 210 days during a tax year (an increase on the current 140 day requirement); and
• actually let for 105 days during a tax year (an increase on the current 70 day requirement).

Mr. Edhouse added that it was not all unalloyed good news. “New rules are to be introduced to stop the off-set of FHL business losses against other types of income and to regularise the Capital Allowances position for FHLs and this may adversely affect some people operating in the sector.
 
“Francis Clark will be making representations to HMRC regarding these proposals as part of this consultation process.”

For further information:

Contact Martin Edhouse at Francis Clark’s South Devon office. Telephone: 01803 320100

Francis Clark has offices in Exeter, Plymouth, Salisbury, Taunton, Tavistock, Torquay and Truro. Francis Clark is the winner of the ‘Auditor of the Year - Mid Tier’ in the National Financial Directors’ Excellence Awards 2011, and LexisNexis Best General Tax Practice Award 2009. More information is available by logging on at our Online Information Centre