×

Resources

Furnished holiday accommodation

Furnished holiday accommodation (FHA) is a classification that allows you to take advantage of favourable tax rates when you rent out your property for a holiday let. Here we explain the criteria needed to qualify.

Updated 19 July 2019

Furnished holiday accommodation (FHA) qualifying criteria

For tax purposes, to qualify as furnished holiday accommodation (FHA) the accommodation must be let on a commercial basis and comply with the following requirements:

The ‘relevant period’ is the tax year unless the accommodation was not let as holiday accommodation in the previous tax year. In that case it is the 12 months beginning on the first day in the tax year that it is let as furnished accommodation.

The consequence of property income being treated as derived from FHA are:

Income tax

Losses

Pension contributions

FHL profits are relevant earnings, qualifying for pension contributions.

Capital gains tax

The following are available:

Inheritance tax

Sometimes, the extent of the services supplied as part of the FHA will be sufficient for the business to qualify for 100% business property relief.

VAT

Rent from furnished lettings is subject to VAT at the standard rate if it is ‘holiday accommodation’, as defined for VAT. Note that this can include income that does not pass the FHA test.

For VAT purposes, holiday accommodation means accommodation in a building, caravan, houseboat or tent that is advertised or held out as holiday accommodation or as suitable for holiday or leisure use, but excluding hotel accommodation.

VAT registration is necessary if the rents from holiday accommodation, together with any other VATable supplies made by the landlord, exceed the registration threshold – £85,000 currently. If the landlord is already VAT registered, the rents will be within that registration. 

Note that this can include VATable property income that does not pass the income tax FHL test.

Business rates

A self-catering accommodation which is available for short-term lettings for more than 140 days in any given year, is subject to Business Rates, not council tax. Small Business Rates Relief may apply, to give exemption. See here for more details.

Here again the test differs from that for direct tax FHL treatment.

 

Specific advice should be obtained before taking action, or refraining from taking action, on any of the subjects covered above. If you would like advice or further information, please speak to your usual Shipleys contact.

Copyright © Shipleys LLP 2019

Current Issues

Tax update for landlords

In this article for Chestertons, Shipleys Tax Principal Mike Luckett gives a round-up of the latest tax changes which landlords should be alert to.

VAT News – Spring 2022

Our roundup of the latest VAT news includes early termination fees and compensation payments, end-customer claim refunds of wrongly charged VAT, plus revised guidance on VAT grouping registration

Businesses set to pay money laundering levy

Some regulated businesses now face paying an annual charge as part of the Government’s drive to combat international financial crime through newly introduced anti-money laundering levy regulations.