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HMRC Let Property Campaign

HMRC Let Property Campaign

Five years ago, we posed the following question. Whether getting the best terms on the tax you pay on your holiday letting income sounded like an attractive proposition? Our question was related to the launch of a new campaign by the Government, aptly called the Let Property Campaign.

The reason for the HMRC Let Property Campaign

In 2013 it was estimated that 1.5 million landlords had underpaid or failed to pay up to £500 million in tax between 2009 and 2010 alone. The campaign was an opportunity for those that had knowingly or inadvertently not paid (or underpaid) tax on their `buy-to-let’ and ‘furnished holiday letting income‘ to come clean and declare it without further hefty penalties.

It’s important to highlight that, whilst many pieces of legislation are aimed at ‘traditional landlords’ with Assured Shorthold Tenancies; this drive from HMRC extends to holiday homeowners and those operating within the tourism and hospitality sector. It essentially targeted anyone who owns more than one home one or more of which generate an income.

The results of the Let Property Campaign

And the results? A recent Freedom of Information request has indicated that over the past five years, 35,099 people have made a voluntary declaration to HMRC – that’s 2.6% of the people that had been identified. Wondering how much of the £500 million tax bill they were successful in recouping? £85 million (17% of the targeted figure).

The importance of being upfront with tax

While these figures are certainly not what HMRC and the Government were targeting at the original outset of the campaign, they are continuing the drive to identify those that are gaining income from properties and not declaring additional sources of revenue.

If you’ve made an error in paying or calculating your tax bill as a result of misunderstanding or deliberately paying the wrong amount, it is strongly advised that you inform HMRC of any mistakes before they discover them, because if you don’t make a voluntary disclosure now and HMRC finds out later, you could suffer higher penalties and face criminal prosecution.

You may also find the following articles of on furnished holiday letting taxation of interest:

When holiday letting your second home to paying guests it’s essential to take advice on suitable insurance. Boshers offer specialist holiday home insurance to holiday letting owners across the UK. Need an insurance quote for your holiday home or cottage complex? Please give us a call on 01237 429444.

*Please remember this article is only a general outline of the tax schemes offered by HMRC. If you are looking for tax information or advice, please contact HMRC directly or seek professional advise.

Holiday Letting Tax

Holiday Letting TaxThe holiday cottage industry brings with it a unique set of circumstances; as providers of specialist insurance for holiday letting owners such as yourself, we understand how to make sure you have the cover that you need, when you need it.  We also appreciate the value that other specialists can add to your holiday cottage business, holiday letting tax and accountancy is certainly one of these.

Owners need to be aware of the latest holiday letting tax legislation and advice in order to make the most of their investment and attempt to gain greater returns.  But how do you keep up to date with this ever changing complex and evolving area?

New edition of Furnished Holiday Lettings – A Tax Guide

If you’re wanting to better understand your tax position as a holiday homeowner, we’re delighted to announce that we’ve teamed up with Claritax Books and tax accountant John Endacott to provide you with the facility to purchase a copy of the latest edition of Furnished Holiday Lettings – A Tax Guide.

This informative book is a practical guide to the tax rules relating to furnished holiday homes and includes comprehensive information on:

  • The background to the tax rules
  • Property letting or trading?
  • Meeting the qualifying criteria
  • Furnished holiday letting in the EEA
  • Sale of a property
  • Holiday lets and exemption from inheritance tax
  • Succession planning for Furnished Holiday Lettings
  • Rates, VAT and other UK taxes

The third edition is 25 – 30% longer than the previous edition and encompasses the latest thoughts on:

  • business structuring to reflect the growth in corporate ownership of property businesses,
  • the impact of increasing number of overseas owners,
  • consideration of the government’s various measures that have increased property taxes on residential property in recent years

It also includes the latest cases on the tax status of holiday lets for income tax and inheritance tax.

Although tax can often be complicated and confusing, you’ll find a number of specifically tailored examples which explain the taxation implications of owning and running a furnished holiday letting property, and the decisions you take each year. Whilst the book isn’t a substition for taking professional advice from your accountant, it will arm you with knowledge to help you better understand the complexities of holiday letting tax.

The book itself is suitable for any of the following:

  • Existing furnished holiday letting owners
  • Prospective holiday home purchasers looking to let their second homes
  • Those considering converting barns or out buildings into furnished holiday lettings

How do I obtain a copy of Furnished Holiday Lettings – A Tax Guide – 3rd Edition?

To order your copy now please click here.

Boshers offer specialist holiday home insurance to owners across the UK. Require a quote for your holiday apartment, cottage or complex? Please give us a call on 01237 429444.

Holiday Lettings - A Tax Overview

Holiday Lets and Tax – What you need to know

Holiday Lettings - A Tax OverviewWe take a look at some of the tax issues holiday homeowners need to be aware of in this article Holiday Letting ~ A Tax Overview

Have you declared your holiday rental income?

When you begin letting a holiday home it’s imperative you tell HMRC (Her Majesty’s Revenue and Customs) about your new rental income as you may have to pay tax on it.

If you’re new to renting a holiday home or have been letting your property for some time and not yet instructed HMRC, it’s advisable to approach them in order for your case to be considered more favourably.

HMRC are currently running a ‘Let Property Campaign’; this encourages holiday homeowners to declare unpaid tax on their let property in order to gain the best possible terms on their tax return.

If you’d like to find out more about this scheme please click here to read our full article on the HMRC Let Property Campaign.

How much holiday rental income do I need to gain before declaration?

If you own a holiday home in your own name, HMRC indicate you must report any rental income above £2,500 in a year through your Self Assessment tax return.

If the rent from your holiday cottage is less than this figure you’ll need to report it to the Self Assessment Helpline by calling 0300 200 3310 (+44 161 931 9070 if you are calling from outside the UK).

What if my holiday cottage is owned by a company?

If your holiday home is owned by a company you’ll be required to show rental income in the same way as any other business income.

What costs can I claim to reduce the tax on my holiday home?

As a holiday homeowner your property may be eligible for Furnished Holiday Letting Rules, which provide potentially advantageous treatment of ‘self catering’ accommodation, treating your property as a trade (from which you create profit and a living from it) rather than an investment.

If you are able to qualify you’ll be allowed to claim capital allowances on furniture and furnishings in your holiday home, as well as equipment used outside the cottage, such as tools for maintenance.

You will also be able to claim a range of Capital Gains Tax reliefs, such as Business Asset Rollover Relief, or with many holiday homes owned by married couples, be able to allocate profits in any proportion required, irrespective of the spouses actual shares in the ownership of the property.

How do I qualify?

You’ll only be able to claim these benefits if all the following apply:

  • Your holiday home is open to guests for at least 210 days a year.
  • Your holiday home is let for more than 105 days a year.
  • No single guests stays for more than 31 days.
  • You charge the going rate for similar holiday homes in the area (referred to as the ‘market value’).

If you own the property personally, your profits count as earnings for pension purposes.

Click here for the latest Guidance document on Furnished Holiday Lettings Self-Assessment.

Working out your holiday home profits for tax

If you have holiday homes that qualify as Furnished Holiday Lets it’s important to work out the profit or loss from these in isolation.

This is to ensure you only claim the favourable tax conditions on qualified properties.

If you own other cottages that don’t currently qualify you’ll need to work out the net profit or loss of all of the properties, as if it is one single business.

What if your holiday home makes a loss?

Deduct any losses from your profit and enter the figure on your Self Assessment form. You can potentially offset a loss against future profits by carrying it forward to a later year, or against profits from other furnished holiday lettings (if you own more than one holiday home).

For more information on Holiday Home tax please visit:

Here are some helpful links on the Furnished Holiday Letting Tax Rules to complement the information contained in Holiday Letting ~ A Tax Overview:

Please note that this article gives only an overview of Holiday Letting ~ A Tax Overview and is not intended as Tax Advice. We suggest you take advice from a qualified professional before making any decisions in this area or contact the HMRC for further guidance. 

As holiday home insurance specialists we understand the needs of holiday letting owners and our policy includes valuable legal expenses cover for HMRC taxation investigations provided that the insured has taken reasonable care to submit complete tax returns within statutory time limits. For more information on how a specialist insurer can help and support your holiday home business, please give us a call on 01237 429444. 

Furnished Holiday Lettings - A Tax Guide

Fresh off the printing press, the second edition of Furnished Holiday Lettings – A Tax Guide was prompted by the Pawson case and the implications for business property relief on holiday lets. It has also been updated with revised HMRC guidance in relation to “dwelling houses” and new rules for fixtures in property.  This clear and practical guide expertly written by taxation specialist John Endacott includes useful guidance inspired in response to the furore over the proposed abolition of the furnished holiday lettings tax rules and the changes to the Finance Act 2011. Furnished Holiday Lettings - A Tax Guide

This informative book is a practical guide to the tax rules relating to furnished holiday homes and includes in its comprehensive contents, information on:

  • Background to the tax rules
  • Property letting or trading?
  • Meeting the qualifying criteria
  • Furnished holiday letting in the EEA
  • Sale of a property
  • Holiday lets and exemption from inheritance tax
  • Succession planning for Furnished Holiday Lettings
  • Rates, VAT and other UK taxes

Providing clear worked examples to explain the taxation implications of owning and running furnished holiday lettings, it makes a useful reference for your accountant and investors wishing to increase their own knowledge and is therefore recommended to:

  • Existing furnished holiday letting owners
  • Prospective holiday home purchasers looking to let their second homes
  • Those considering converting barns or out buildings into furnished holiday lettings

Furnished Holiday Lettings – A Tax Guide 2nd Edition is available to purchase here.

For advice on specialist insurance for furnished holiday lettings get in touch with our dedicated team on 01237 429444.

Time is running out for holiday cottage owners to upgrade their property while simultaneously cutting their tax bills. A £30m tax break, which cuts the cost of second homes for more than 65,000 families, is to be withdrawn next month because of EU laws. Read the full article here 

Last chance for holiday home owners to comment on new holiday let rules. New rules on furnished holiday lets will make it more difficult to let certain properties, reduce the number available and act as a barrier to new entrants to the industry. That is the verdict of a Westcountry expert on holiday lettings who is urging affected businesses to express their concerns to Government before consultation on the new rules ends next week (February 9).

John Endacott, tax partner at accountants Winter Rule in Truro and a prominent commentator on the issue of furnished holiday lets, said the revised rules would lead to significant changes in the industry.

They say that holiday lets must be available to let for 205 days in a year (up from 140) and actually let for 105 days in a year (up from 70), which could see more marginal properties in less popular areas fail to qualify. The Government is also tightening up on the ability to offset trading losses against profits, something which Mr Endacott said could deter new entrants to the industry trying to let properties with no letting record. He said: “I’ve no doubt that these new rules will result in consolidation in the industry because the lettings targets are going to be onerous for some owners and planning restrictions may actually prevent some properties from meeting the 210 day requirement.

“The new regime around trading losses is also very restrictive and means it will take a very long time to get tax relief on start-up losses. That will be a barrier to new entrants and high investment into single units does not look like a good business model.”

Mr Endacott said the new rules would probably lead to more owners with greater numbers of furnished holiday lets, but he was hopeful that owner-occupiers of holiday let complexes may be exempt. He added: “Winter Rule will be making further representations to the Government before next week’s deadline so if anyone wants to get in touch they can email me at taxcampaign@winterrule.co.uk.”

HM Treasury in conjuction with HM Revenue & Customs have published a consultation document on proposed changes to the special tax rules for furnished holiday lettings. 

FHL Consultation

The consultaion is on proposals to ensure the tax rules for furnished holiday lettings are fully compliant with EU law and are better targeted at holiday letting businesses that are run commercial for profit rather than for personal use.

The proposals are to:

  • increase the minimum period over which a qualifying property is available to let to the public during a year from 140 to 210 days;
  • increase the minimum period over which a qualifying property is actually let to the public during a year from 70 days to 105 days;
  • restrict the use of loss relief from furnished holiday lettings so it can only be set against certain income from the same business;

The consultation seeks views on the impacts of these proposals, and is an opportunity to influence the details policy implemention.

The Furnished Holiday Lettings Consultation document is available to download here 

Tax reliefs on Furnished Holiday Lettings – unexpected bonus for UK holiday home owners. According to various articles in the press, the Government has dropped the removal of tax relief on Furnished Holiday Lettings. This was one of several tax increases in the Budget, due to be enacted before Parliament was dissolved prior to the General Election on the 6th May.
The tax increases were abandoned after negotiations to fast-track the Finance Act through Parliament ahead of the General Election on the 6th May. The Conservatives had refused to sanction the fast-tracking of the legislation – unless these changes were dropped.
This will at least buy more time for political lobbying against these potentially damaging tax changes and meanwhile offers a welcome reprieve for Furnished Holiday Let Owners. 

2010 Budget | Furnished Holiday Letting (FHL). As announced last year, the tax advantages of Furnished Holiday Letting businesses will be withdrawn with effect from 6th April 2010. Income from FHL will be treated in the same way as income from other property rents. This means there will be less advantageous offset of losses and a number of Capital Gains Tax (CGT) reliefs will no longer be available. However according to our accountants, it appears that Entrepreneurs’ Relief will apply to disposals of a FHL property within 3 years of 5th April 2010, potentially reducing the effective rate of CGT on up to £2m of gains from 18% to 10%.

Furnished Holiday Lets | Your Emergency Tax Planning Guide
Boshers Holiday Home Insurance clients and friends can follow the link to purchase a copy of this invaluable guide and receive a 30% discount off of the RRP of £24.95 + £1.95 postage and packing. Simply use the discount code BOSHERS which is case sensitive. Please note that Boshers Ltd have no connection with the Tax Cafe and will not receive any remuneration from the sale of their publications, instead this is passed on as a saving to you. This book will be of interest to Holiday Home Owners and may just throw up some interesting points to discuss with your professional advisers.

Calls for Government rethink on holiday letting tax change. A GOVERNMENT tax change that could cause the closure of holiday lettings, an increase in second homes and cost the county’s economy an estimated £5 million has been slammed by tourism promoters, owners of holiday homes and MPs.

The Government announced in the last Budget that it was proposing changes to the tax laws related to furnished holiday lettings, which, if they were passed would become effective in 2010.

The changes would see owners of holiday homes no longer being able to claim tax back on furniture they buy to decorate their lettings. They would also be unable to offset losses against other income, and capital gains tax relief would also be scrapped.

Tim Farron, MP for Westmorland and Lonsdale, has joined 63 other MPs in signing an early day motion against the Treasury’s changes. He believes the changes could damage South Lakeland’s tourism economy and lead to an increase in the number of second homes in the Lake District.

“These changes would make it more expensive for people who run holiday lettings,” said Mr Farron. “People would just have to sell them and they would become second homes. We would lose properties that are currently bringing in an income. It would be a loss to the economy and the community.

“The Lake District has an all year round holiday season so the local shops, pubs and post offices are being used by the visitors staying in the holiday homes. Second homes are used perhaps ten weeks a year, so the benefits to the community are far less, it would cost our area possibly £5 million,” he said.

Tony Sawyer, 76, owns four holiday apartments as part of a barn conversion in the Mallerstang valley. He wants the Government to reconsider the change as he believes it is unfair of the Government to ask for higher accomodation standards while taking away the tax benefit.

“It is a business as far as I am concerned, I supplement my pension with it,” he said. “The Government, through its tourism bodies, like Visit Britain, is constantly putting pressure on us to raise standards.

“In the last three years I have spent £50,000 on this, replacing doors, windows and upgrading furniture to improve the visitor experience. It is grossly unfair.”

Mr Sawyer is backing calls by holiday agents Holiday Cottages Group for the Government to scrap the scheme.

“This policy is ill thought out and penalises the wrong people,” said Geoff Cowley, managing director of Holiday Cottages Group. “It’s not the large absentee second home owners, who may have been the Government’s target, that will be affected but the individual owners of successful small letting businesses and rural communities whose income is largely dependent on them.”

Ian Stephens, chief executive of Cumbria Tourism, which promotes tourism in the county, said the organisation stood ‘shoulder to shoulder’ with Mr Farron and the Holiday Cottages Group on this issue.

“We think this is unfair and damaging to the tourism industry,” he said. “Holiday lettings businesses are vital to the rural economy here and this has the potential to threaten jobs and local enterprise.

“The blanket approach of the policy seems to penalise genuine businesses operating within the industry and could possibly encourage more dormant second homes being created as owners take their properties off the visitor market or decide to sell them.

“It also creates a disincentive to invest in improvements which are vitally important for customer satisfaction and influencing repeat visits.

It would also be counter to the Government’s tourism strategy, which wants improvements in the quality of accomodation and more jobs created in rural areas.”