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Holidays at Home – Furnished Holiday Lets and Tax

Natasha Heron, tax manager specialising in property taxes at accountants Hillier Hopkins, comments

The restriction on international travel has resulted in a surge in UK holidays. Property owners are cashing in as everywhere you turn it appears new Furnished Holiday Lets (FHLs) are being created or converted. The tax treatments for holiday lets are very different to buying to rent or owning a home.

This article summarises the Stamp Duty Land Tax (SDLT), Capital Allowances (CAs), Capital Gains Tax (CGT) and VAT considerations.

A FHL is a furnished property which is occupied for a few nights or weeks and is usually subject to a daily rate. This is different to a rented residential property occupied by tenants that is subject to monthly rent and the tenants are most likely contracted under an Assured Shorthold Tenancy (AST).

SDLT applies to properties located within England or Northern Ireland and the legislation does not include a definition for FHLs. A property’s features at the date of purchase are considered rather than its future intended use.

HMRC’s stance is that FHLs will typically be classified as residential property as they are occupied as dwellings by the short-term visitors. A FHL would be subject to the residential rates and 3% higher rates for additional properties will apply.

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