National Lockdowns and local restrictions may mean that you are unable to meet the tests for your holiday let to qualify as a furnished holiday letting (FHL) for 2020/21. However, where this is the case, all is not lost as there are alternative routes by which your let might meet the FHL requirements.

FHL tests

To qualify for the more advantageous FHL tax regime, your property must be let commercially, let furnished, and it must be in the UK or the EEA. It must also meet all of the following occupancy conditions.

  1. The pattern of occupancy condition – the total of all lettings that exceed 31 continuous days in the tax year cannot be more than 155 days.
  2. The availability condition – your property must be available for letting as furnished accommodation for at least 210 days in the tax year. Days that you stay in the property do not count.
  3. The letting condition – your property must be let commercially as furnished holiday accommodation for at least 105 days in the tax year (excluding lets of more than 31 days and days occupied cheaply or free by family and friends).

If you have failed to meet the letting condition in 2020/21 due to the impact of the COVID-19 pandemic, you may be able to make an averaging and/or a period of grace election to help you reach the magic number. HMRC Helpsheet HS253 contains further details.

Averaging election

If you have more than one property that you let out as furnished holiday accommodation, you may be able to use an averaging election to help all your properties to qualify. This will be the case if some but not all of the lets meet the letting condition. An averaging election allows the condition to be met by reference to the average occupancy across all your holiday lets. For example, if you have three holiday lets and the total number of days in the tax year on which the properties are let as furnished holiday accommodation is at least 315 days, all 3 properties will meet the requirement. The average let will be at least 105 days.

An averaging election for 2020/21 must be made by 31 January 2023.

Period of grace election

A period of grace election can be made as well as, or instead of, an averaging election. It will help if you genuinely intended to meet the letting conditions, but were unable to do so, for example, because of the impact of the COVID-19 pandemic.

To qualify, the property must have met the letting requirement for the year before the year for which you first wish to make a period of grace election; so, if the first year for which an election is required is 2020/21, the letting condition must have been met (individually or as a result of an averaging election) in 2019/20. A second election can be made for 2021/22 if the condition is not met again in that year. However, your property must meet the requirement in 2022/23 if it is to continue to qualify as a FHL.

As with an averaging election, a period of grace election for 2020/21 must be made by 31 January 2023.

Talk to us

Contact us on 0114 231 4731 or to discuss how you can ensure that your holiday let qualifies for the favourable FHL tax regime.