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Going on holiday. Counting the days

Furnished holiday lettings (FHLs) have their own tax treatment, reliant on a set of strict day-count rules. With the impact of Covid-19 on occupancy, business owners may need to take stock of the position.

A property must pass all three tests:

  • pattern of occupation condition: the total of lets of more than 31 continuous days must not exceed 155 days a year
  • availability condition: property must be available for let for at least 210 days in the year (exclude any days you stay there yourself)
  • letting condition: property must be let commercially as furnished holiday accommodation to the public for at least 105 days a year. Exclude days let to friends or relatives at zero or reduced rates: and lets more than 31 days (unless the 31 days extend due to unforeseen circumstances, such as a guest becoming ill and unable to leave on time).

For established lets, tests apply to the tax year (for income tax): and to the 12 months of the accounting period (for corporation tax). There are slightly different rules on commencement and cessation.

If your day counts to 5 April 2021 falls short of the letting condition, a ‘period of grace election’ could preserve FHL status. But you must still meet the other two tests. The election can be available if you have a genuine, demonstrable, intention to let, but can’t, for example, because of cancellations due to unforeseen circumstances. For the year to 5 April 2021, this can include Covid-19 measures like enforced closure due to lockdown or travel ban. If you have more than one FHL, you may be able to use an averaging election to a similar effect. We should be delighted to advise further if you have concerns here.

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