Tax Reductions for Landlords of Furnished Holiday Lettings
Landlords that rent furnished holiday homes in the UK or EEA (European Economic Area) for more than 140 days a year may be entitled to tax breaks until 2014. If you meet the qualifying criteria and can provide evidence in writing to HM revenue and Customs you will be entitled to tax benefits.
To qualify for tax advantages holiday lettings must fulfil the qualifying criteria:
– The location of the holiday rental is situated in the UK or EEA
– The property is furnished
– It is available for 210 days in at least 7 months of the year (not necessarily consecutive months)
– It is let as a holiday rental for at least 105 days at market value
– It is not let to the same occupant for more than 31 days
If you do not meet the 210 days qualifying and let your property to family and friends for reduced rates to make up the 105 day threshold, HMRC will disallow this period and you will not be entitled to tax benefits. The benefits you are entitled to are:
– the right to claim capital tax allowances
– Capital Gains Tax when you sell or “otherwise dispose” of the property
Regardless of whether you submit your Self Assessment Tax Return by post or online, HMRC request that you send evidential records by post. The documents you are required to submit are:
– The dates the property was rented out
– How much rent you received
– a record of business expenses
– sales receipts, invoices and bank statements
It may be the case that HMRC investigate your claim for Capital Gains Tax they may demand that you forward the records above for the previous six years, therefore always keep your historical records available for at least this period of time.
How to work out taxable profit
Calculating taxable profits for furnished holiday lettings is processed in the same way as any other type of income landlords receive from renting commercial property, other than the ‘wear and tear.’ New furniture you buy for the property together with household appliances and any maintenance work that is required are all subject to tax reductions providing you can provide the receipt for proof of purchase.
Landlords with holiday rentals that don´t meet the 210 day qualifying period may still be entitled to tax breaks under the old terms as HMRC are allowing property owners a transitional period to adjust to the new rules. Therefore you can make your holiday letting available for 70 days of the year rather than 105 – but only up to 31 January 2014.
If you fall into the category calculating tax can be complicated and we recommend you seek professional advice from qualified chartered accountants. If you are a landlord of holiday lettings call Taxaccolega, a low fixed fee accountants, today on 08000 235 234 or email firstname.lastname@example.org