Consultation launched on holiday cottages lettings taxes

Consultation on changes to tax rules for holiday accommodation letting has started with an appeal for trade views. 

Plans to repeal the Furnished Holiday Lettings rules, announced in last year’s budget, were reversed in the first coalition government budget in June when it was announced that a public consultation would be held over the summer.

Trade views are now being sought on proposals to change the special tax rules for furnished holiday homes which are let out commercially. The deadline for responses to the consultation is October 22.

Furnished holiday lettings currently benefit from various tax reliefs, normally only available to people carrying on a trade, such as the ability to claim allowances on items such as furniture, kitchen fittings and household appliances used in the property.
A joint HM Treasury and HM Revenue & Customs (HMRC) consultation document contains a number of proposals for change:
•         increasing the minimum period that a qualifying property must be let out for in a year, from 10 weeks to 15 weeks

•         increasing the minimum period that a qualifying property must be available for letting in a year, from 20 weeks to 30 weeks

•         restricting the use of loss relief, so losses can only be set against future income of the same business and not, as now, against other income

•         ensuring businesses with properties in the European Economic Area (EEA) are eligible to be treated as qualifying furnished holiday lettings in the same way as businesses with properties in the UK.

To qualify under current rules a property must be in the UK and be available for holiday letting on a commercial basis for at least 140 days (20 weeks) in the tax year and actually be let for at least 70 days (10 weeks). Individual lettings for periods of longer-term occupation (more than 31 consecutive days) should account for not more than 155 days in the year.

Any changes will come into force from April 1, 2011 for companies and from April 6, 2011 for individuals. For the current tax year, 2010-2011, the existing temporary extension of the current rules will continue to apply. HMRC said.
Exchequer secretary to the Treasury David Gauke said: “Furnished holiday lettings play a vital role in any tourism industry, and the UK is no different.
“These proposals balance the need to make sure the rules are affordable, provide support to genuine commercial businesses, and meet our obligations under EU law.
“We really want to hear the views of trade people who have an interest in these issues. The best legislation comes about through good consultation, so we would value any contributions, however large or small.”
Interested parties are asked to submit their views by email to

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