Furnished Holiday Lets and VAT

The furnished holiday let (FHL) rules allow holiday lettings of properties that meet certain conditions to be treated as a trade for some specific tax purposes. As an FHL is treated as a business, it is important to remember that VAT must be accounted for on furnished holiday lettings once the VAT registration threshold is surpassed. 

This means that all FHL income would be subject to VAT at the 20% standard rate once the VAT registration threshold, currently £85,000, is breached.  Anyone with an FHL with gross rentals exceeding £85,000 in the previous 12 months or expected to exceed £85,000 in the next 30 days is required to register for VAT. If the owners of an FHL business already hold a VAT registration in relation to other business activity, then the FHL income would be subject to VAT from the start. Of course, VAT registration may offer some benefits in allowing for the VAT recovery on refurbishment, maintenance and day-to-day running costs associated with the property in question.

In order to qualify as a furnished holiday letting, the following criteria need to be met:

  • The property must be let on a commercial basis with a view to the realisation of profits. Second homes or properties that are only let occasionally or to family and friends do not qualify.
  • The property must be located in the UK, or in a country within the EEA. 
  • The property must be furnished. This means that there must be sufficient furniture provided for normal occupation and your visitors must be entitled to use the furniture.

In addition, the property must pass the following 3 occupancy conditions. 

  1. Pattern of occupation condition. The property must not be used for more than 155 days for longer term occupation (i.e. a continuous period of more than 31 days).
  2. The availability condition. The property must be available for commercial letting at commercial rates for at least 30 weeks (210 days) per year. 
  3. The letting condition. The property must be let for at least 15 weeks (105 days) per year and home owners should be able to demonstrate the income from these lettings.  
Source: HM Revenue & Customs Mon, 11 Jul 2022 00:00:00 +0100

More Posts

Breaking even – checking the numbers

In previous newsfeeds we have described how you can calculate the level of turnover you need to create in order to meet all your costs whether they be fixed costs (rent, rates etc.,) or variable costs (goods you need to buy to convert into goods you sell).

For example, if your fixed costs are £50,000 per annum and your variable costs are 25% of your turnover, the annual turnover you need to breakeven will be £200,000. The formula is:

Annual fixed costs divided by 25 (the gross profit)

Bereavement Support Payment

The amount of Bereavement Support Payment you can claim will depend on your relationship to the person who died and when you make your claim.

Your payments will be paid into your bank, building society or credit union account.

If you were married or in a registered civil partnership with the person who died

If you were receiving Child Benefit when your partner died (or did not get it but were entitled to it), you will get the higher rate.

This is made up of:

a first payment of £3,500;

Tax codes for employees

The P9X form is used to notify employers of the tax codes to use for employees. The latest version of the form has been published and shows the tax codes to use from 6 April 2023. The form states that the basic personal allowance for the tax year starting 6 April 2023 will, as expected, be £12,570 (£12,570 in 2022-23) and this means that the tax code for emergency use will remain at 1257L.

The basic rate limit will be £37,700 (£37,700 in 2022-23) except for those defined as Scottish taxpayers

Properties not let at commercial rates

There are special rules where a property is let at less than a commercial rate or isn’t let on commercial terms. These rules also apply if a property is occupied rent free or at less than a commercial rate, for example, a property is occupied by a family member at a reduced or nil rent.

In these circumstances, HMRC can take the view that unless the landlord charges a full market rent for a property and imposes normal market lease conditions, it is unlikely that the expenses of the property are

Send Us A Message