What Covid-related relief has HMRC granted for the Furnished Holiday Letting (FHL) industry? In short – nothing specific.
However, there are two existing reliefs that can be used to preserve FHL status which then can lead to valuable CGT reliefs on a future business or property disposal.
To qualify as an FHL, the property must:
Be available for let 210 days of the tax year;
Be actually let for 105 days; and
Not be in the same occupation for more than 31 days.
With the pandemic, some FHL properties have been falling short of the above requirements. So, to assist, try taking advantage of these reliefs:
Averaging: – If you have more than one FHL, it is possible to combine the actual periods of occupancy across several properties in order to meet the 105-day requirement. You do not need to include all the FHL properties you own either. If it is possible to make the 105 day average across, say three properties but not the fourth, you can exclude the last one.
Period of Grace: – Alternatively, where an FHL has met the letting requirements in one tax year, you can elect for the property to continue to qualify for a further two years before losing the FHL status. The grace election cannot apply where an averaging election has been made on that property and can also only be applied to the 105-day test. There are time limits for making the election so you cannot have a Grace election in the second year if you failed to elect in time for the first. Finally, for a grace election, the property must continue to qualify as an FHL in a later year (so you cannot use a Grace election and then cease)
Remember, UK FHLs are classed as separate businesses to non-UK properties
With these reliefs already in the legislation, if your FHL business has suffered during the pandemic, some form of tax relief may already be available. Hope this helps.