The Furnished Holiday Lettings Tax Rules
Since the 2009 Budget, properties that are rented out as Furnished Holiday Lettings have been entitled to a number of tax advantages and benefits over other rental properties. Holiday rental owners can take advantage of these exemptions as long as your holiday property is let out in keeping with certain rules and guidelines.
Rules for Furnished Holiday Rentals
To make sure your holiday property qualifies you must keep within some rules or “qualifying tests”. To qualify as a furnished holiday letting it must be:
In the EEA
Available for commercial short term lettings as holiday accommodation for at least 210 days a year
Commercially let as holiday accommodation for at least 105 days of the year (you must charge market rate, rather than cheap rates e.g. what you’d charge your friends and family).
You are not allowed to rent your holiday property out to the same person for more than 31 days at once. However if you meet all the qualifying criteria for 210 days (or 211 days in a leap year) then there are no restrictions on longer leases for the next 155 days.
The Benefits of the Furnished Holiday Lettings Rules
Claiming Expenses off your Taxable Profit
If you rent holiday properties as short term lettings you are allowed to deduct certain expenses and allowances from your rental income to work out your taxable profit. This means your rental income tax will be lower. If you already rent properties long term you’ll be familiar with this process. The only difference is that instead of claiming “wear and tear allowance” you can claim “capital allowance”. Your capital allowance counts can be claimed for each item of furniture, soft furnishing, or piece of equipment (such as a fridge freezer, washing machine or ironing board) you provide in your holiday home. You can claim other expenses such as cleaning and gardening equipment.
There are also many ways you can take advantage of the current tax exemptions on Holiday Lettings
You can carry a loss forward and offset it against future letting profits. If you have a UK holiday home the losses can only reduce the future holiday let profits of the UK holiday home. If you have an EEA holiday let the loss can only reduce future EEA holiday let profits. You cannot use a holiday let loss to reduce your other taxable income.
Your professional adviser at the Tax Office about Capital Gains tax reliefs on the sale of Furnished Holiday Lettings or Holiday Properties. Or visit the HM Revenue and Customs website.
Do I need to keep any paperwork?
To complete the land and property pages you must keep:
A record of your business expenses
Sales receipts, invoices and bank statements
All these records for six years after the tax year concerned
You can read the Governments official pages on the Furnished Holiday Lettings Tax here
You can read about the 2011 - 2012 Changes to the Holiday Lettings Tax Rules here
Disclaimer: This information was taken from Direct.gov.uk. HomeAway Inc is not responsible for any opinions, advice or content on any third party sites.