It is true that every business starts at some point and the same is the case with a furnished holiday letting business.
Furnished holiday lettings, unlike typical rental homes, are subject to unique tax restrictions. As a result, they can claim capital allowances for furniture, fixtures, and fittings and benefit from capital gains tax reliefs for dealers. Profits from a furnished vacation rental business are also deductible for pension reasons.
But to access such reliefs from FHL, the letting must meet several tests filtered by chartered accountants in Slough.
The tests
The let must be furnished and should be located somewhere in the EEA or the UK. The property is required to pass all three of the following conditions:
Condition 1 – The pattern of occupation condition
Continuous lets of 31 days or more must remain below 155 days and should not exceed this limit in total in the year.
Condition 2 – The availability condition
The property must be available for at least 210 days in the tax year for letting as furnished holiday accommodation. The number of days are not counted when the landlord stays in the property.
Condition 3 – The letting condition
In the tax year, the property must be let as furnished holiday accommodation for at least 105 days. 31 days or long-term let’s are excluded as periods when the property is let for free or at a reduced rate to friends and family or any related person.
Period for which the tests are applied
These tests are used to assess whether a home qualifies as a furnished holiday letting for the tax year in the case of an ongoing holiday letting.
For the first year, however, different rules apply, and the tests are carried out throughout a 12-month period beginning with the start of the holiday leasing by accountants in Slough UK. As a result, certain periods will be considered twice when determining whether the property qualifies.
Example
Tony buys a cottage and plans to prepare it as a furnished holiday let in Devon. The sale of the property is completed in August 2021. He then spends the next couple of months refurbishing the property and announcing it as a holiday let on 14 November 2021. In this case, the letting commences in the tax year of 2021-22.
For the first year, the tests are applied which starts from 14 November 2021-14 November 2022.
So, the tests are carried on a tax-year basis.
