Do you own a furnished holiday property
Do you own a furnished holiday property?
Recent changes have raised some important planning considerations for owners of Furnished Holiday Lets (FHL) property:
Loss Relief:
The ability to offset losses from FHL trading was severely restricted on 5 April 2011. From that date, the ability to offset FHL losses against other income of FHL property business owners was removed. Losses must now only be offset against income from the same FHL business.
Capital Allowances:
FHL refurbishment costs may qualify for capital allowances under the Annual Investment Allowance. Until 5 April 2012 (31 March 2012 for companies) owners can claim up to £100,000. This reduces to £25,000 from 6 April 2012 for income tax payers and 1 April 2012 for companies. (See earlier news story 'Annual Investment Allowance reduced to £25K' for more information.)
Qualifying conditions:
From the end of the current tax year (5 April 2012) the letting criteria that qualifies a property as a furnished holiday let will be amended as follows:
-The property must be let for an annual minimum of 105 days (increased from 70 days) and
-The property should be available to let for no less than 210 days a year (increased from 140 days).
-Relevant property owners may need to reassess their bookings strategy for 2012-13 to ensure that they stay within the qualifying conditions.
Capital Gains Tax:
At present, FHL property owners should be able to claim Entrepreneurs' Relief when they sell as long as the qualifying conditions for that relief have been met. If there is a danger that you will not meet the additional letting criteria set out in 3 above, and you were already considering a sale of the property, a completed disposal before 6 April 2012 may be advisable.
Please contact us for more information about how planning issues may affect your business.
Submitted by MSB Accounting on Friday 2nd September 2011