James Bailey, the Tax Partner at the well-known Cornish accountants Robinson Reed Layton, said that the announcements on 9 December concerning changes to the rules for Furnished Holiday Accommodation (FHA) had some small measure of good news mixed with the expected bad news.
James said:
“From April 2011, it will only be possible to claim relief for losses made in an FHA business against profits of the same business, whereas until now the relief could be claimed against any other income you had for the same tax year. In addition, FHA businesses will be divided into those with properties in the UK, and those with properties elsewhere in the European Economic Area, and there will be no relief for losses on a UK business against profits of an EEA business, or vice versa.”
“FHA must be available for letting for 140 days per year, and actually let for 70 days, and these periods are to be increased by 50% to 210 days and 105 days respectively, but unlike the other new rules, this change has been postponed until April 2012 – to give the industry time to adjust, according to HM Revenue and Customs.”
“The good news, such as it is, is that these tests based on days available and days actually let can be met on an average basis over all of the FHA properties in the same ownership. This has been true of the “actually let” test for some years, but now it will apply to the “available to let” test as well.”
“The most helpful proposal in a generally unhelpful document, however, is that if a property qualifies as FHA for one year, and then fails to qualify for the next one or two years because it is not let for the required 105 days in those years, it will be possible to elect for it to be treated as FHA for those two years as well. The way the draft legislation is worded, however, the property would still have to be “available” for 210 days in the year, so this measure will not be much help (for example to a landlord who wants to refurbish a property) unless there are amendments. My fear is that it is no more than a “soft landing” for those businesses who for whatever reason (such as planning restrictions or a very short holiday season) are not going to be able to meet the new letting test.”
[PHOTO: James Bailey]
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