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Markel Tax

07 Aug 2020

FHL Qualifying Rules

Q: I have not been able to let my holiday home in Cornwall since the beginning of the Covid-19 lockdown. In previous years the property letting has always met the rules for a furnished holiday let (FHL). Business seems to be picking up again and bookings are coming in, but will the property still be able to benefit from the FHL tax treatment?

A: All the conditions that a property needs to meet in order to qualify as a FHL still need to be met for a property to benefit from being classed as an FHL despite the Covid-19 lockdown restricting people’s ability to use such properties.
These conditions are that the property must;

  1. Be let on a commercial basis with a view to making a profit; and,

  2. Be available to the public for 210 days in a tax year; and,

  3. Be actually let for 105 days in a tax year; and,

  4. Each let does not exceed 31 continuous days.

Therefore, despite people being unable to travel for large portions of the summer holiday season, holiday home rental properties must have been commercially let for at least 105 days between 6 April 2020 and 5 April 2021 to qualify for FHL tax treatment for 2020/21.

However, if your property fails only on the ‘actually let’ condition, there are a couple of options available to you to ensure that your property continues to qualify as an FHL, such as electing to average the ‘actually let’ days over multiple FHLs (averaging election) or carrying forward the FHL status of the property from the previous tax year (period of grace election).

If your property was occupied by one party for more than 31 days due to the travel restrictions put in place as a result of Covid-19, there may be scope to claim that the excess days fall within the definition of ‘circumstances that are not normal’ so the property can still qualify.

If you would like to discuss these claims and elections further, please contact Sophie Webb or Nicola Goldsmith or call our TaxDesk on 0370 218 5278.

Tagged Property tax & SDLT Property tax & SDLT