Resources
HMRC Furnished Holiday Lettings consultation
Background
1 The special tax rules for furnished holiday lettings allow property businesses that meet
certain conditions to be treated as a trade for some specific tax purposes. These are:
• loss relief;
• capital allowances;
• Landlords’ Energy Saving Allowance (LESA);
• certain capital gains reliefs (including business asset roll-over relief, entrepreneurs’
relief, relief for gifts of business assets, relief for loans to traders and exemptions for
disposals of shares by companies with a substantial shareholding); and
• relevant UK earnings when calculating the maximum relief due for an individual’s
pension contributions.
2 To qualify for this tax treatment, the following conditions must be met:
• the property must be situated in the UK or the European Economic Area (EEA);
• the business must be carried on commercially, and with a view to a profit;
• the total periods of “longer term occupation” must not exceed 155 days during the
relevant period. A period of “longer term occupation” is a letting to the same
person for longer than 31 continuous days. The relevant period is normally the tax
year.
• the property must be available for commercial letting as holiday accommodation to
the public for at least 140 days during the relevant period; and
• the property must be commercially let as holiday accommodation to members of
the public for at least 70 days during the relevant period. A letting for a period of
“longer term occupation” is not a letting as holiday accommodation for the
purposes of this condition.
3 Historically, the tax rules were only available for lettings of UK properties.
4 However, recognising that the UK rules may not have been compliant with EU law, HM
Revenue and Customs has applied these rules to properties situated elsewhere in the EEA from
22 April 2009, the date of the 2009 Budget.
5 At Budget 2009, the previous Government announced the repeal of the special tax rules for
furnished holiday lettings from April 2010 for UK and EEA lettings. This would have meant that
the income and losses would have been taxed and relieved under the tax rules applying to
property businesses.
6 The Government has listened to the views of businesses and the tourism industry and has
decided not to proceed with the previous Government’s proposal to repeal the special rules for
furnished holiday lettings.
7 The Government has rejected a repeal of the special tax rules for furnished holiday lettings
rules because of the adverse affect this would have on UK businesses and the tourism industry.
However, the Government has also decided that it would not be fiscally responsible simply to
extend the current tax rules to properties situated elsewhere in the EEA, without other changes.
That is why it proposes to introduce changes to the qualifying conditions to ensure that
properties that are let as a commercial or full-time furnished holiday lettings business will
continue to benefit from the favourable tax treatment.
8 This consultation looks at proposals to change the special tax rules for furnished holiday
lettings. The proposals balance the need to:
• make sure the rules meet our obligations under EU law;
• continue to provide support to commercial businesses; and
• ensure that the changes are affordable.
