Furnished Holiday Lettings
Special provisions apply in the case of furnished holiday lettings. In basic terms, the letting of furnished holiday accommodation is treated as a trade.
The following are some of the benefits arising from assessment as a trade:
- loss relief can be claimed against general income - not just against profits from other let property
- capital gains tax roll-over and retirement relief can be given subject to the usual conditions
- the income comprises relevant earnings for the purpose of personal pension or retirement annuity relief
- income tax on the income is payable in two installments
- capital allowances can be claimed on certain expenditure
- relief for pre-trading expenditure may be available
- inheritance tax business property relief may be available
A number of stringent conditions must be satisfied before the taxation of the income is relaxed and treated as a trade. There must be ‘commercial letting' of ‘furnished holiday accommodation' in the UK.
If the conditions are satisfied, then the income from furnished holiday lettings is still assessed as business profits, and the deductions allowed are the more extensive ones available to traders. Thus such expenditure as bank overdraft interest and the cost of most travelling to the let property will be deductible. The other benefits are summarised above.
LMG has knowledge of this specialist sector and is happy to answer questions on this subject via the Enquiry Form.