Chaos in furnished holiday lets

Holiday Cottage News, by Veronica & Anne.

As far as we are aware the fact the FHL ( furnished holiday lets) measures that were dropped from the Finance Bill have caused nothing but confusion and it’s very difficult to say what will happen. Below is a brief article from our company accountants outlining what could happen but it would appear we will have to wait until after the General Election for some clarity.

Chaos in furnished holiday lets

In the interests of having the Finance Bill legislation passed in time to dissolve Parliament, the measure abolishing the favourable treatment of furnished holiday lettings (FHL) has been dropped.  What is not at all clear is what will happen next.

Labour have stated that the measures removed will be introduced in the next Finance Bill, immediately after the General Election.  It is not clear whether the measure could then be started with effect from 6 April 2010, or whether there would possibly be a one year delay.  One thing that is sure is that if Labour returns to power, the measure will reach the statute books very quickly.  Other parties, whilst keen to see the measure dropped from the Bill have made no clear commitment on tax breaks for this area.

What may happen if another party comes to power is that alternative provisions could be introduced which allow genuine holiday letting businesses continue to qualify for the tax reliefs as a business and withdraw them for those who own a second home, who let it out and offer it to friends and family and manage to meet the current qualifying conditions for furnished holiday let treatment.

One way that this could be achieved is by allowing the furnished holiday let reliefs in a tax year where at least two properties are owned and let under the qualifying conditions.  An alternative would be to focus on non-occupation of properties which are subject to FHL reliefs.  This would mean that when relief is claimed, the owner of the property and any connected persons could not occupy it or the reliefs would be lost.

Whatever the outcome, it is clearly a period of greater uncertainty for owners of furnished holiday let properties in respect of how their income and gains will be taxed.

For further information on any of the above contact Alan Taylor, Campbell Dallas LLP on 01738 441888 or alan.taylor@campbelldallas.co.uk. Their website can be found at http://www.campbelldallas.co.uk.

Please mention www.whichcottage.com as a useful referral point.

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