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HMRC internal manual

Property Income Manual

Furnished holiday lettings: overview

Overview

Properties that meet the qualifying tests for furnished holiday lettings are charged under the property income rules.

Trading principles apply to furnished holiday lettings in just the same way as they apply to other lettings. Hence the explanations given in the rest of this manual about the way receipts and expenses are dealt with apply equally to furnished holiday lettings.

But furnished holiday lettings have some tax advantages over other lettings, these are set out in PIM4140. The major advantages under the special rules are:

  • Entitlement to plant and machinery capital allowances on furniture, furnishings, etc. in the let property, as well as on plant and machinery used outside the property (such as vans and tools); but there are no capital allowances for the cost of the property itself or the land on which it stands. There is more about capital allowances generally at PIM3010 onwards.

  • CGT reliefs for traders such as rollover relief and business taper relief. Full guidance can be found in the CG manual, see CG73500 onwards.

  • The finance costs and interest restriction set out in PIM2054  does not apply to any loans/mortgages referable (on a just and reasonable basis) to the part of the property business that consists of furnished holiday lettings. Therefore, if the property business consists entirely of furnished holiday lettings then this restriction does not apply.

Please note however that ‘replacement of domestic items relief’ (set out in PIM3210) is not available for FHLs.

A letting is regarded as a furnished holiday letting where the property is furnished and the letting meets all three qualifying tests, see PIM4110.

This guidance will look at the following issues:

  • How to decide if there is furnished holiday letting for IT or CT purposes under the current rules (2011-12 onwards)

  • How to decide if there is furnished holiday letting for IT purposes under historic rules (2010-11 and earlier)

  • How to decide if there is furnished holiday letting for CT purposes under historic rules (2010-11 and earlier)

  • How to calculate the profits/losses of a furnished holiday letting

  • How to treat losses from a furnished holiday let under the current rules (2011-12 onwards)

  • How to treat losses form a furnished holiday let under historic rules (2010-11 and earlier)

  • How the tax treatment of furnished holiday lettings differ from other residential property rentals (other than the differences already discussed in respect of losses)