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Furnished holiday lettings might be tax-friendly under certain conditions. However, some requirements must be met. This allows furnished holiday leasing landlords to qualify for several tax reliefs, including relief for business asset rollovers and sales. In addition, the landlord can claim capital allowances for rental property fixtures, furnishings, and equipment. Longer lets may appeal as winter approaches, and bookings drop. But, financially, does this make sense?
Conditions
A furnished holiday let must first be furnished and meet all three of the following occupancy conditions:
1. The property must be rented as furnished holiday accommodation for at least 210 days throughout the tax year to meet the availability condition (excluding days when the landlord stays in the property).
2. The property must be rented for at least 105 days in the tax year to meet the letting condition. The home must also be rented as a fully furnished holiday property. Long-term leases and free or subsidised leases to family and friends are ignored.
3. The pattern of availability conditions limits the number of tax year days rented above 31 to 155. It’s mandatory.
Holiday rentals often have many guests for various durations of time. Therefore, HMRC does not consider lets of 31 days or longer holiday stays; hence they are disregarded when determining whether a property meets the requirements mentioned above for a holiday lease. The sole exception to this rule was when the property was initially rented out for fewer than 31 days, but the guests could not leave on the expected date and stayed there for 31 days or longer due to unforeseen events. For example, this may happen if the guest is sick and can’t go. Also, it might happen if the guest’s trip was canceled or postponed.
The availability condition cannot be met if the property is rented for more than 31 days, totaling 155 days. The availability condition requires the property to be a furnished holiday lease for at least 210 days throughout the tax year. The availability condition cannot be met if the property is rented for 155 days. If the property is rented longer than the minimum, the availability condition will not be met. The property will not meet this condition for the coming tax year if it has one five-month or more extended rental agreement. Shorter and longer leases make it harder to follow the rental agreement. Except for 31-day lets, the property must be rented as holiday accommodation for at least 105 days every tax year. Under these conditions, the property must be rented as holiday accommodation for at least 105 days.
What should you do if offered a longer lease during the off-season? As long as the availability condition is met, this may be fine even if the let does not raise the total number of days the property is met out for 31 days or more to 155 or more. Thus, no issue. You must still comply with rental conditions.
Even if the longer lets violate the availability condition, there is still an event to rescue the situation. If you rent the property for other holiday lets, known as the average condition, it might qualify as a holiday lease. A grace election period may rescue the day if the property has been authorized as a furnished holiday rental. Depending on the details, you can “have your cake and eat it” and earn long-term rental money when the property is empty while still qualifying as a furnished holiday let. This “have your cake and eat it” method is a pun. “Having your cake and eating it” describes this.