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HMRC internal manual

Property Income Manual

Furnished holiday lettings: calculating profits and losses

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ITTOIA/S327, CTA09/S269

Separate Calculation of profit/losses

The customer needs to calculate the profit or loss arising from qualifying furnished holiday lettings separately from their other rental business profits and losses to see whether they can take advantage of the special rules. But any overall profit is included in the general property business result; and so is any loss unless they use it separately against other income.

The normal rules for calculating rental business profits should be used. Bear the following points in mind.

One business

All the furnished holiday lettings by a particular person or partnership are treated as one FHL business for the purpose of giving relief. Once a particular property qualifies, all the income from that property will qualify for the special treatment for that year, including lettings outside the period when the furnished holiday lettings conditions are met. See:

  • ICTA88/S503 (1)(b) for CT cases (up to 2009-10),

  • ICTA88/S504A (1)(b) for IT cases (for 2005-06 and 2006-07),

  • CTA10/S65 (3) for CT cases (for 2010-11 onwards, and

  • ITA07/S127 (3) for IT cases (for 2007-08 onwards).

Class 4 National Insurance Contributions

Although the income is treated in many ways as if it were from a trade, it remains assessable as property income, so Class 4 NIC is not payable.

Property closed for part of the year

Where a property is kept solely for letting as furnished holiday accommodation, but is in fact closed for part of the year because there are no customers or no business, allow the whole of expenses such as insurance, interest, etc. provided there is no private use.

Part only of property let

Where only part of a property is let as furnished holiday accommodation, receipts and expenditure should be apportioned on a just and reasonable basis. See:

  • ICTA88/S503 (6) for CT cases (up to 2009-10),

  • ICTA88/S504A (4) for IT cases (for 2005-06 and 2006-07),

  • CTA10/S65 (5) for CT cases (2010-11 onwards)

  • ITA07/S127 (7) for IT cases (for 2007-08 onwards).

The Commissioners on appeal can review the apportionment.

Property stops being a FHL

A property will no longer be a FHL if the:

  • property is sold

  • property is used for private occupation

  • letting condition isn’t met even with the averaging and period of grace elections

If a customer’s  property doesn’t qualify as a FHL or stops being a qualifying FHL, the special tax treatment will no longer apply.  The customer will need to work out any balancing allowance or balancing charge for capital allowances (see CA23210) and any Capital Gains Tax reliefs will be affected (see CG63950P onwards in respect of entrepreneurs relief; CG60250C onwards for business asset roll over relief; CG66450C onwards for gifts and similar transactions; and CG50200C for securities and shares).

Capital allowances

If plant and machinery on which capital allowances are claimed is partly used for private purposes (for example outside the holiday letting season) an appropriate fraction only of the capital allowances will be due, as with any capital allowances claim where there is private use.

Non-qualifying years

Strictly, if a property qualifies in one year but does not do so in the next, the disposal value of plant and machinery should be brought into account. If income from a property temporarily ceases to qualify solely because not all the tests are satisfied for that year, capital allowances may be continued. But if a property is let on a long-term basis, or sold, or otherwise seems unlikely to qualify in the foreseeable future, disposal value should be brought into account.


If the computation shows a loss, see:

  • PIM4120 for treatment of losses for 2011/12 onwards

  • PIM4130 for treatment of losses for 2010/11 and earlier