Is it still worth making a claim for capital allowances on a Furnished Holiday Let?

In this blog we explore whether it is still worth making a claim for capital allowances on a furnished holiday let or lets (FHLs) in the European Economic Area (EEA) which includes the UK. If a claim is possible then it may generate a sizeable income tax or corporation tax rebate and reduce the claimants ongoing tax liability for many years to come. Provided of course tax is paid in the UK and the property is not held within a pension wrapper or fund.

Since 2009/10 Furnished Holiday Lets in not only the UK but the European Economic Area have been eligible for a capital allowances claim provided they meet the qualifying criteria.

What is the qualifying criteria?

For a furnished holiday let to qualify for capital allowances there are three main qualifying criteria:-

  • Availability test since April 2102 – during the tax year, the accommodation is available for let to the public for at least 210 days.
  • Occupancy test – This was  increased to 105 days for tax year 2012/13 onwards
  • Pattern of occupancy – the property must not be let for periods of “longer term occupation” for more than 155 days during the tax year. A “longer term occupation” is a letting to the same person for longer than 31 consecutive days.

The offsetting of losses.

Since the tax year 2011/12 onwards any losses made may only be offset against profits from other properties in the same FHL business or carried forward to utilise against from the same FHL business. So you could not offset losses from the UK FHLs against profits from the EEA FHLs, because these are deemed to be two  distinct and separate businesses.

“Prior to April 2011, you were able to utilise FHL losses to offset tax on other income but this option has now been removed by HMRC” 

Please contact Curtis Plumstone Associates for  free advice on whether commissioning a capital allowances claim on your FHLs will reduce your tax liability in the UK.

Curtis Plumstone Associates are based in Hampshire but carry out capital allowances claims across the UK and the European Economic Area. All initial advice is given free of charge and we are able to provide high level reviews in advance of any engagement.

See Case Studies for examples of the work we have undertaken recently.