The Chancellor should use the Budget this week to relax the conditions for rental properties to qualify as furnished holiday lettings (FHLs), say leading tax and advisory firm, Blick Rothenberg.
Fiona Fernie a partner at the firm said: “FHLs are increasingly popular as a result of sites such as Airbnb and Booling.com and, with foreign travel continuing to be banned as a result of coronavirus restrictions, are likely to be more in demand this summer than ever before.”
She added: “ The problem is that due to strict tests imposed by HMRC property owners are likely to lose their tax status which would effectively give them a higher tax burden through no fault of their own.
“In view of the crippling impact of the pandemic on the hospitality industry, it seems only reasonable that the Chancellor, and HMRC, should create a concession for 2020/21 and 2021/22 so that this does not happen.”
Fiona said: “ The problem is this, the Government have encouraged FHL ownership, by providing tax benefits compared to properties let out normally or on an Assured Shorthold Tenancy – including the generous treatment of mortgage interest as an allowable deduction in full, the potential for a lower capital gains tax rate on sale and the income taken into account when making pension contributions.
“However, there are very strict tests as to what can be considered to be an FHL, including what are known as the 3 occupancy conditions, all of which have to be met. These are: that the property must be available for letting to 3rd parties as an FHL for at least 210 days in the year, must actually be let commercially to the public for at least 105 days in the year, and lettings which exceed 31 continuous days must not exceed 155 days during the year.”
She added: “The pandemic is likely to have caused many landlords operating FHLs to fall foul of these conditions.”