The Government has published a consultation document setting out proposed changes to the tax treatment of furnished holiday lettings. Furnished holiday lettings currently enjoy preferential tax treatment as compared to other types of let property.
Under the existing rules, furnished holiday lettings that meet certain qualifying conditions are treated as a trade for certain purposes, which enables them to benefit from more generous loss relief than other types of lettings as well as providing landlords with the availability to claim capital allowances on furnishings, furniture and fixtures and to enjoy capital gains tax reliefs (such as rollover relief and entrepreneur's relief) that are available to traders.
The consultation document proposes a number of changes that reduce the benefits of the existing furnished holiday lettings treatment. These include:
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increasing the number of days for which the property must be available for commercial letting as furnished holiday accommodation during the tax year from 140 to 210 days;
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increasing the number of days for which the property must actually be let during the tax year (excluding lets of 31 days or more) from 70 to 105; and
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restricting the use of losses from a furnished holiday lettings business.
The changes will apply to both furnished holiday lettings in the Uk and the EEA.
Comments on the proposals are sought by 22 October 2010. Draft legislation is to be published following the consultation and the measures, which are to take effect from 1 April 2011 for companies and 6 April 2011 for individuals, will be legislated for in the Finance Act 2011.
The consultation document is available to download from the Treasury website.