The Furnished Holiday Lettings (FHL) Regime: Recent Changes

The Furnished Holiday Lettings (FHL) regime has always stated that any holiday property owners can subtract any holiday rental losses income from other sources, e.g. UK earnings. The government has said that Furnished Holiday Lettings is a definition that is applicable to solely UK properties. However, in 2009 the government were found to be in breach of EU law and had to lift the restriction of furnished holiday lets from just the UK. This resulted in an inundation of claims for loss relief, from both past and the present, for all qualifying holiday lets situated in the European Economic Area.

Realising this would happen and expecting millions of pounds of tax refund claims, the then Labour government consequentially announced that the scheme to reimburse furnished holiday lets would be withdrawn effectively from 5th April 2010. This received strong opposition, understandably from holiday home owners in the UK, and the new coalition government stated in its first Budget in June 2010 that they would be reinstating the Furnished Holiday Lettings in some form. There would be instead a consultation on how to review the rules which determine if a property can be defined as a furnished holiday let, meaning that properties that do not qualify can no longer offset losses against other forms of income in the future. This review process is still going on.

Many people are confused over what rental losses include. Rental losses include any amount whereby any rental expenses have exceeded rental income. The Furnished Holiday Lettings regime regards holiday homes as though they are commercial properties despite the fact that assets housed in residential properties are outside the scope of capital allowances. This has resulted in capital allowances being allowed to be claimed on all residential houses that qualify as furnished holiday lets, bringing some unpredicted results.

The current rules will remain in place until at least 5th April 2011 the government have recently announced, but the criteria for eligibility are then likely to exclude many properties. “The most likely way this might be achieved is by raising the number of days that the property is actually occupied by paying guests as a holiday home” adds Lovell. The message is clear – anyone who owns a holiday home anywhere in the UK or in the European Economic Area should make a claim now, before their entitlement to do so is potentially withdrawn.

If you think you could be entitled to claim rental losses the best advice is to visit your local accountant who can advise you. There are many accounts over the UK; the best bet is to search for someone local to you e.g. accountants Basingstoke or independent accountant Basingstoke.