Furnished Holiday Lettings Regime to Go: Know your deadlines

Update!

30.07.24

It’s been a long wait but we have finally received an update from HMRC regarding the abolishment of the Furnished Holiday Let (FHL) tax regime.

Here is what they have announced – “Businesses with FHL properties will no longer be eligible for more beneficial capital allowances treatment but will instead be eligible for ‘replacement of domestic items relief’ in line with other property businesses — where an existing FHL business has an ongoing capital allowances pool of expenditure, they can continue to claim writing-down allowances on that pool — any new expenditure incurred on or after the operative date must be considered under the property business rules.”

This means that if you have clients with an FHL, now is the time to reach out to us for advice on making a claim before it’s too late. It’s not necessary to process a claim before the abolishment date of April 2025, however, it is important to make all planned purchases before this date. Learn more about the announcement.

There are several dates to note down

Claim Deadline: 31st January 2025

Individuals owning an FHL have until 31st January 2025 before losing First Year Allowances e.g. Annual Investment Allowance (AIA) against expenditure incurred in the 2023/24 tax year. Individuals also have until the 31st of January 2025 to claim under the current regime. This includes expenditures incurred in previous tax years (assuming a claim is available and possible). It’s crucial these deadlines are understood given the current landscape surrounding Capital Allowances relating to FHLs. Acting too soon may expose you to problems, given it has not yet been confirmed what happens to any remaining pool of Capital Allowances within tax returns after the FHL regime no longer exists.

Awaiting Detailed Rules and Guidance

Until the government publishes detailed rules and guidelines on how the abolition will be implemented. It may well be advisable for FHL owners to wait before making any significant financial decisions. The lack of clarity on the specifics of the abolition means that premature actions could lead to suboptimal financial outcomes.

However, if you are thinking, or in the process, of buying, selling, or renovating your property, we advise you not to wait and get in touch.

Company-Owned FHLs: Strategic Thinking

For FHLs owned within a company with fiscal year-ends in June, July, or August, immediate action may be required. Owners should consult with a specialist to determine if a claim should be made before the year-end. In order to avoid losing first-year allowances (this assumes costs have been incurred in recent/open tax returns). Post-year-end, the opportunity to claim these allowances may still be possible. However crystallising the tax benefit could take significantly longer, or even be lost given how the FHL sector is exposed to the legislation changes.

If a company year-end is after August, we would encourage clients to be patient and await confirmation of the intended rule changes. Again, if you are buying, selling, or about to renovate an FHL, please get in touch.