New announcement. Learn more

CHARTERED ACCOUNTANTS (ICAEW)

News and advice to help make your property business a success

LANDLORDS FINANCIAL BLOG

All

Landlords Tax Property Tax Landlords Tax Returns Property Accounts Property Tax Return Landlords Accounts Chartered Accountants Online Accountant Online Bookkeeping Online Tax Returns Tax Returns Your Online Accountant Your Online Bookkeeper Businessadvice Accounting Tax Cashflow Smallbusiness Businesstips Property Accountant Taxplanning VAT Furnished Holiday Lettings Inheritance Tax Property Property bookkeeper Annual Exempt Amount Business Rate Capital Allowances Capital gains tax property Compliance Deductibleexpenses Employment Allowance Finance Financialmanagement Holiday Lets Tax Landlords Accountant Landlords Financial Making Tax Digital Mileage Allowance Mobilephones Overlaprelief Pension Ppr Property Company Tax Property Tax Deductible Expenses Rent a Room Relief SDLT Small Business Taxreturn TimetoPay VAT invoice 60 day capital gains limit Accrualsbasis Acquisitions Advisoryfuelrates AI AirBnB Allowable Business Expenses Alphabet shares Amap Annual Tax on Enveloped Dwellings Appeal Assessment Asset disposal Associated Company Associated Company Tax Rules Bad Debt Bad Debt Tax Relief Baddebts Badgesoftrade Beancounter Benefits in Kind Breakeven Point Budget Business advice Business asset deferment Business coach Business Continuity Business Entertainment Business Expenses Business Rates Relief Business tips Businessgrowth Businesstypes Buy or Lease Equipment Buytolet Capital Allowances for Cars Capitalallowances Car Capital Allowances Carry Back Losses Cgt Change of Tax Basis ChatGPT CIS Scheme Common Tenant Companies Expenditure Companies House Company Account Deadlines Company Account Filing Company Strike Off Company Tax Efficient Property Companyassociation Companyloanstaxfree Compulsory Strike Off Construction Industry Scheme Contacthmrc Contentmarketing Corporation Tax Losses Corporation Tax New Regime Corporation Tax Rates CorporationTax Costs Cryptocurrency Deductible Business Expenses Depreciation Development Directors Directors Loans Directorsloans Disallowable Business Expenses Discovery Disincorporation Dividend allowance Dividend Allowance Reduction Dividend Planning Dividends DLA Domestic Items Tax Relief Dormantcompany Employee Discount Employee management Employeecompensationpayments EmployeeOwnershipTrust Endoflifeplanning Enquiry EnterpriseResourcePlanning Entrepreneurmindset Equity Expenses Expenses Allowed For Tax Eyetests FHLs Flipping Furnished Holiday Lets Tax Gift Aid Gifts Growthhacks Help to pay tax bills HICBC HMO Licensing Fees HMRC complaints Holdoverrelief Holiday Lettings Tax How to apply for a Business Loan How to Extract Profit Humour Ihtexemptions Illegaldividends Influencers Inheritance Tax Nil Rate Band Interestrestriction Investment Property Tax Joint Tenant Keypersoninsurance Landlord Repairs Landlords Self Assessment Late vat registration LBTT Leadgeneration Leadmagnet Leanbusinessmodel Letting Agent Disbursements Letting Agent Recharres Lettings Relief Limitedcompany Long Lets Tax Longservice LTT Mainresidencerelief MakingTaxDigital Managed Lets Management accounting Mileage payment Minimumwage Mixedusesdlt Mortgage costs Mortgage Interest Relief New property Newcompanycarfuelrates Newnicrules NIC 2023 to 2024 NIC savings Nmwerrors Non-taxable Optiontotaxvat Overpayment Relief Paperform Partnership Partnershipbusinesses Parttime Patternofoccupancy PAYE PAYE by Direct Debit Penaltypoints Pension Payments Tax Relief Performance-reviews Periodsofabsence Personal finance Personalallowance Personalguarantees Postcessationrelief Profit Profit-and-loss Property Allowance Property Development Company Property Incorporation Property Investment Company Property investor accounts Property investor tax tips Property Letting Property Rental Business Property Trading Propertyallowance Propertycompany Recharges by Estate Agents Regularpayments Reimbursedexpenses Rent your drive Rental Rentaroom Research & Devolopment Residence Relief Residential property gains Retail stock control Retainedprofits Room for rent tax SA Salary SDLT changes Section 455 Tax Selective Licences Landlords Self Assessment Self-employednic Selfemployed Seperation Servicecharges Settlementslegislation Simplified Expenses Smallbiz Smallbusinessraterelief Software Spring Budget Staffparties Stamp duty SuccessJourney Tax Allowance on Driveways Tax Allowances Tax Deadlines Tax Filing Deadlines Tax Free Childcare Tax free income Tax on Company Vans Tax position Tax Relief Tax tips for landlords Taxbillpayments Taxconsequences Taxincentives Taxposition Taxpositionassets Taxrelief Taxreliefs Taxses Terminationpayments Tips Trade professional Transfer Assets Transfer Assets Between Spouses Undisclosedincome Unpaid Rent VAT Bad Debt Relief VAT Deadlines VAT Disbursements VAT Penalties VAT registration Vatpenalties Vatregistered Vatregistrationthreshold Wellbeing

TAGS

Letting the FHL for longer periods during the off-season

November 1, 2023

Letting the FHL for longer periods during the off-season

Letting holiday properties, particularly in coastal resorts, may have a strong seasonal bias, and when business is slow during the off-season, it can be tempting to let the property on a longer let. For example, a property could be let on short-term holiday lets over the summer months and on a six-month residential let during the winter. However, adopting this approach may have tax implications and prevent the property from accessing the tax benefits available to furnished holiday lets (FHLs).

Definition of a furnished holiday let

Furnished holiday lets benefit from more generous tax rules than residential lets. They are able to access capital gains tax business reliefs, and also are not subject to the interest rate restriction applying to residential lets, meaning interest and finance costs can be deducted in full in calculating the taxable profit.

However, these benefits are only available to properties that pass certain tests. To qualify as an FHL the property must be let furnished and must meet all three of the following occupancy conditions.

Condition 1 – the pattern of occupation condition

For the property to be an FHL, the total of all lets that exceed 31 days must not be more than 155 days in the year.

Condition 2 – the availability condition

The property must be available for letting for at least 210 days in the tax year.

Condition 3 – the letting condition

The property must be actually let for at least 105 days in the tax year. Where this test is not met in relation to a particular property for a particular year, the property may qualify as an FHL by virtue of averaging or a period of grace election.

For a continuing let, the tests are applied for the tax year.

Implications of long lets

Letting anFHL for longer periods may mean that the pattern of occupancy condition is not met. Where lets of more than 31 days total more than 155 days in the tax year, the property will not be an FHL. This will mean that during the off-season, a longer let cannot exceed 155 days (roughly five months) – lets longer than this will mean that the pattern of occupancy condition is not met. Assuming lets are kept at below 31 days during the peak season, the property can only be let on longer lets in the off-season for a maximum of five months if the goal is to retain FHL status.

However, the maxim of not letting the tax tail wag the dog should be borne in mind – it may be preferable for the property to be let on a residential let during the off-season rather than it being left empty, even if this jeopardises its FHL status.

patternofoccupancy

Landlords Tax

Landlords Accounts

Landlords Tax Returns

Property Tax

Property Accounts

Property Tax Return