Changes were introduced to the occupancy thresholds from April 2012 (1 April for Companies and 6 April 2012 for individuals) that have affected the conditions that a property will need to meet to qualify as a Furnished Holiday Letting (FHL) as detailed below.

• The minimum period over which a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days in a year with effect from April 2012.
• The minimum period over which a qualifying property is actually let to the public in the relevant period is increased from 70 days to 105 days in a year with effect from April 2012. 

As FHL are treated as trade for some purposes they benefit from some tax advantages over other tax lettings such as. 

• Capital allowances - furniture, furnishings etc (qualifying as plant and machinery) in let property as well as plant and machinery used out of the business (such as vans and tools).
• Capital gains –Entrepreneurs relief, Business Asset Rollover relief, relief for gifts of business assets, and relief for gifts of business assets and relief for loans to traders.
• Profits count as earnings for pension purposes. 

In order to help businesses meet the new occupancy thresholds and retain the tax advantages detailed above HMRC have introduced two elections.

• Averaging election - is helpful where you have more than one FHL property.
• ‘Period of grace’ election - allows you to treat a year as a qualifying FHL year where you genuinely intended to meet the occupancy threshold but were unable to meet it subject to certain conditions. 

For full details on FHL elections and other tax implications of FHL see HMRC - Furnished Holiday Letting Helpsheet 253.  

If you require further advice and assistance on meeting the new FHL requirements please contact us.