Furnished holiday lets (FHL) accountants

The complete furnished holiday let

accounting package

Everything you need to manage & maximise your holiday let finances covering initial review, eligibility criteria, tax planning and tax compliance.

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  • Tailored tax advice
  • FHL Accounting specialist
  • Year-round tax planning and advice
  • Personal Tax Returns calculation & submission
  • FHL property portfolio accounting software
Furnished Holiday Lets (FHL) Accountants

Furnished holiday letting (FHL)

Holidays lets continue to be hugely popular and appeal to a broad range of investors, which can be run through a company, an individual, or a partnership.Each year millions of holidaymakers flock to holiday lets, so as investors, there are fantastic yield opportunities and tax reliefs. As a property landlord, you have the added benefit to use the property yourself or offer it to family and friends (at no charge).

What is a furnished holiday letting (FHL)

What is a furnished holiday letting (FHL)?

A property rented out on a short-term basis (most commonly to tourists or holidaymakers) and is let for less than 31 consecutive days can be classified as a Furnished Holiday Let (FHL).

There are many benefits for such properties that qualify as an FHL compared to properties that are rented out on a residential basis on a long-term basis.

Qualification criteria

To qualify as a Furnished Holiday Letting property, a number of conditions must be met such as:
Location

The property must be situated in the UK or in the European Economic Area (EEA).

Availability condition

The property must be available for commercial lettings as holiday accommodation to the public for at least 210 days (30 weeks) of the tax year.

 
Letting Condition

Out of the 210 days, the property must be let out for at least 105 (15 weeks) days as holiday accommodation. If you let more than one property as an FHL, and one or more of these properties does not meet the letting condition of 105 days, you can elect to apply the letting condition to the average occupancy rate for all the properties you let FHLs. This is called an averaging election.

Any longer-term lets (more than 31 days) to friends or family do not count towards the 105 days if you have let the property at no cost or a discount, as all lets must be commercially let (i.e. there must be an intention to make a profit through commercial let).

In addition, the FHL must be furnished sufficiently for regular occupation.

Tax Advantages of an FHL Property

Business asset rollover relief - The property must be available for commercial lettings as a holiday accommodation to the public for at least 210 days (30 weeks) of the tax year.

Perhaps one of the most useful and commonly used relief. The Entrepreneurs relief allows the business owner to pay a flat 10% tax on the chargeable Capital Gains as compared to Capital Gains tax of up to 28% that may apply on non FHL properties.

If you gift your business assets to anyone, then gift holdover relief can be claimed. This means you do not have to pay the Capital Gains Tax when giving away the property; instead, the tax is deferred until the property is subsequently sold by the person receiving the gift.

Unlike residential rental properties that no longer attract Capital allowances, FHL properties allow you Capital Allowances for the cost incurred to furnish the property. This helps to reduce both your taxable profits and your tax bill.

Instead of paying Council tax, your accommodation will now be considered a Business property, so it will incur Business Rates instead. Given the general location of the FHL properties, you will almost always end up paying less in Business rates than council tax.
Benefits

Can I offset any tax losses from FHL?

You can deduct any losses from future UK FHL profits if your company suffers a loss in the UK. You can offset the loss in your EEA FHL business against future profits in your EEA FHL.

However, if you have the UK and an EEA FHL business, you cannot offset the losses against the profits of the other. In addition, you cannot offset a FHL company's losses against a non-FHL property company’s profit.

In addition, FHL losses can only be offset against the same trade i.e., FHL profits under the same vehicle. If you have one FHL in your own name as an individual and another FHL under a Ltd company, you would not be able to offset against each other even though they are both FHL because of the vehicle type.

offset any tax losses from FHL
costs be deferred to the following tax year

Can any costs be deferred to the following tax year?

If you are purchasing an FHL that overlaps the change in the tax year, and the property requires maintenance work to bring them up to acceptable liveable standards (which may take eight weeks to complete), then ‘Yes’ you can.

You cannot claim any capital expenditure or costs (e.g. property extensions to the property etc.) against income. Still, they can be combined when you sell the property and offset it against Capital Gains Tax. Revenue expenditure will be allowable, and if it creates a loss, these can also be offset against future profits.

Concerning any pre-commencement trade expenditure, if this were incurred within seven years of trading, it would qualify if it was a property let when you bought it. You can add these into your calculations in the year when you commenced trading.

For example, you may not be claiming the loss in a prior tax year or even do a tax return to record those losses but then bring it forward in the tax year the trade commenced.

The FHL qualifying weeks conditions do not impact the pre-commencement revenue expenditure incurred within seven years of the trade and can be offset against revenue once the trade begins.

I own a number of holiday let properties

The good news is that you can combine your FHL properties. For example, if you have three FHL properties in the UK, they can be pooled, making one holiday furnished let business as long as they are not trading as separate limited companies.

The same applies to any properties you own in the EU.

I own a number of holiday let properties

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How we help

How we help?

Fusion Accountants provides a fully comprehensive service that covers initial review, eligibility criteria to tax planning, and tax calculation (including submissions) to clients who run Furnished Holiday letting businesses.

Our service also includes;

  • Dedicated Accountant who specialises in FHL property to help you with assessment and planning
  • Provide monthly/yearly accounts to help you understand your business financial performance and position
  • All year round tax planning and advice to ensure you make the most of any tax reliefs available to help minimise your tax
  • Award-winning cloud accounting software to assist with the management of your FHL property portfolio and help reduce your admin paperwork & processes
  • Personal Tax Returns calculation & submission
  • Comprehensive Limited Company accounting service (if you are running your FHL through Ltd Company)

Meet our FHL landlord specialist

Jawaad Hussain

Jawaad Hussain

Client accountant

I joined the Fusion team in 2015, and as an ACCA qualified Client Accountant, I work closely with SME’s providing tax, accounts, and business advice.

I am also certified with Xero, QuickBooks & FreeAgent. I particularly enjoy using technology and smart apps to support the business’s needs and growth.

I like playing football (BIG Liverpool fan – YNWA!), cycling and trekking. I also enjoy travelling and visiting new places. My favourites destination so far would have to be Istanbul.

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