FURNISHED HOLIDAY LETTINGS (FHL) REGIME – to be abolished from 6th April 2025.
Properties meeting the qualifying tests for FHLs are taxed under special rules and owners of such properties can access various tax advantages not available for other lettings, including:
- Entitlement to plant and machinery capital allowances on items of fixtures, furniture, furnishings and equipment.
- Finance and interest restrictions did not apply and were fully deductible on FHL properties
- Income from a FHL held jointly by a married couple or civil partners is not caught by the default 50:50 split for income tax purposes
- Profits from FHLs can be treated as relevant earnings for pension purposes
- Business asset rollover relief, which allows a gain made on the sale of an FHL property to be deferred if the proceeds are reinvested in another qualifying asset (which could have been another FHL property or trading premises)
- Gift hold-over relief, allowing a gain made on gifting an FHL property to be held over
- Business Asset Disposal Relief (BADR) and a CGT rate of 10% can in some circumstances be available on sale
Whilst we are still awaiting the full details of the changes, anyone owning FHL property may wish to consider the options open to them before the FHL rules are abolished. Any planning that is undertaken will need to be completed before 5 April 2025.
If you would like to discuss how these changes might impact you please do not hesitate to contact us.