Furnished Holiday Lets (FHL) have a slightly different tax treatment to residential property income. Although many aspects will be similar certain advantages come from being treated as an FHL. Because of this it's not just a matter of choice but the designation must be earned.

 To qualify as a FHL the property must be:

• let with a view to making a profit (this for example would prevent someone trying to subsidize their family vacation property with only minor lettings or restricted to family and friends making a token contribution of costs).
• The occupants are allowed to use the furniture and items are sufficient for everyday living.
• The property meets the annual availability tests and minimum of 105 days actually let on commercial terms.

 The benefit of being treated as an FHL is the ability to claim capital allowances, which for residential letting income are not available. Care should be taken as the use of capital allowances does not extend to structures and buildings allowance. In reality most capital allowances will be items of machinery and furniture used in the property.

 One of the biggest benefits is when claiming finance costs. Whereas residential property finance costs are restricted ( see our post Property Series - Relief for Finance Costs) they are not restricted for FHL activity. If a individual is in receipt of both residential and FHL income the structuring of finance costs should be closely examined to ensure the most beneficial tax relief is achieved.

 If you would like help in reviewing your property income and determining if your activity qualifies as FHL income please give us a call or send a message.  

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