The measure
From 6 April 2010 the furnished holiday letting (FHL) rules will be repealed because they are not compliant with European law. These measures currently treat landlords deriving income from furnished holiday accommodation in the UK as trading for certain tax purposes provided that they satisfy certain conditions. Until the FHL rules are repealed, HMRC will extend these rules to furnished holiday accommodation elsewhere in the EEA, but not outside of it.
Once repealed, the consequences will be that:
- Any losses can only be carried forward against future profits of property letting; no sideways relief against other income;
- The 10% wear and tear allowance will be replaced by a claim for capital allowances;
- Profits will not be pensionable;
- Capital gains tax reliefs such as rollover relief, holdover relief and entrepreneurial relief will no longer be available.
Who will be affected?
Owners of holiday homes in the UK and the EEA
When?
The repeal takes effect from 6 April 2010. The extension of the current relief to the EEA applies until then.
Our view
Whilst the extension of the favourable tax treatment to holiday lettings in the EEA but outside the UK is welcome, its repeal is not.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
