Tax rules on holiday rentals

[dayglo]

My relatives have a second UK property that they use for furnished holiday lettings. Now that there seems to be a change in the tax rules surrounding this, they are seriously considering selling the house, would it make any difference when they sell it?

[Ray Coman]

If you have decided that you are going to sell the property, then from a tax perspective it would be better to sell the house before the new changes take effect on 6 April 2010. Your potential capital gains tax liability could be much lower if you were able to exchange before this date.

[thesaraservice]

it may be worth thinking about the amount you will lose by selling at a lower price (as the market is low at the moment) compared to the amount you will gain by selling up before the tax changes take effect

[crystal_10]

What qualifies as a furnished holiday letting?

The property must be in the UK and

• available for holiday letting to the public on a commercial basis for 140 days or more, and
• let for at least 70 days, and
• let for periods of longer-term occupation (31 consecutive days or more) for no more than 155 days during the year.

What are the advantages of a furnished holiday letting?

If your holiday letting meets the above criteria you can use your annual investment allowance to claim for furnishings and furniture in the property as well as plant and machinery used outside the property (such as vans and tools). You can’t also claim the wear-and-tear allowance, though.
Losses

Any losses from your furnished UK holiday lets can be used to reduce tax on general income rather than just rental income.
Losses arising from rental properties normally can be used only against other rental income.
Losses arising in accounting periods ending between 24 November 2008 and 23 November 2009 can be carried back three years, instead of the usual one year.