The furnished holiday let (FHL) rules allow holiday lettings of properties that meet certain conditions to be treated as a trade for tax purposes.
In order to qualify as a furnished holiday letting, the following criteria need to be met:
There is a special period of grace election which allows homeowners to treat a year as a qualifying year for the purposes of the furnished holiday let rules where they genuinely intended to meet the occupancy threshold but were unable to do so subject to a number of qualifying conditions.
In any other cases, where the qualifying conditions are not met, the normal property income rules apply. Trading losses from a furnished holiday lettings business can only be set off against qualifying future FHL profits.
Now is a good time to check that any clients with FHL’s will achieve the relevant occupancy requirements before the end of the current tax year. This should be done to ensure that they have met the minimum qualifying requirements and are able to continue benefiting from the special FHL tax rules.