There are certain criteria that determine whether a property qualifies as an FHL. Take a look at our Furnished Holiday Lets page to see what that checklist involves.
Some examples of items that qualify:
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Water pipes
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Carpets
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Electrical wiring
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Fitted kitchens
A Furnished Holiday Let claiming it's capital allowances
To fully illustrate the potential tax savings it’s important to see it in action.
Our client purchased land and built a luxury holiday cottage. The review process included a look into the cost of building the property, plus the cost of the additional chattels. Meaning we could discover what tax relief had been claimed.
Our findings…
Total cost – £287,000
Capital Allowances identified – £75,572
Total tax savings – £16,670
Find out more about this Furnished Holiday Let case study.
Observations and key points to consider from our MD Chris Roberts;
An increasing number of clients with FHLs have discovered an opportunity, due to the restrictions in relation to travelling abroad during the last couple of years. These holiday lets have either been bought, built, renovated, or converted. As with all sectors, some scenarios are more straightforward than others.
The history of property ownership and how the property has been used by prior owners is often overlooked. It is important to stress that CAA2001 S185 does still need to be satisfied – meaning it’s important not to claim items that previous owners could or have claimed. It’s an important requirement to understand how the property is being acquired. Plus, how the property was acquired by the previous owners, and their previous owners.
What are your future plans?
A key crucial consideration is how long you intend to run the property as a qualifying FHL.
This factors in the risk of not being able to fully utilise all of the capital allowances available. For example; if you change the use from FHL to Buy to Let after two years of running the property as an FHL, what happens to the remaining pool of capital allowances? The answer can differ dramatically depending on a client’s situation.
Once an approach to claiming capital allowances has been confirmed possible, ensure your future plans or potential future options with that property are considered. Meaning you are aware of any potential risks of capital allowances going to waste.
Is your FHL a “qualifying” FHL for Capital Allowances?
Not all FHLs may qualify, there are set conditions and requirements that need to be met. As with all capital allowance legislation, having a full understanding is key and may open the ability to claim capital allowances where it is assumed this wouldn’t be possible e.g. the average rule.
We always encourage a conversation with an expert to understand whether a legitimate claim is possible and just as importantly, how can your tax profile benefit from it.
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