Long term rental of Furnished Holiday Let?

by Readers Question

9:32 AM, 29th May 2020
About a month ago

Long term rental of Furnished Holiday Let?

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Long term rental of Furnished Holiday Let?

We have received an enquiry for long term rental of 3 months for our Furnished Holiday Let (FHL), over our quiet period this coming winter and it appears quite tempting to take it.

We have been running this FHL over the last 5 years and have complied with the occupancy rules each year and fully qualify. My concerns are relating how we can safely accept this booking while still maintaining the FHL status?

We would still able comply with HS253 rules by only counting 31 days towards the minimum 105 days and still have sufficient other stays to exceed 105 days. Also the total of all lettings that exceed 31 continuous days is not going to be more than more than 155 days. So it would appear the rental would be allowed and we would still maintain FHL tax benefits.

My major concern is with regards to us unwittingly granting creating an AST by allowing this. I found this article: https://thenegotiator.co.uk/holiday-lets-and-the-law/

Any suggestions or advice would be greatly appreciated.

Roger

Editor’s Notes:

HS253 Furnished holiday lettings (2018) >> .Gov Click Here

2. Occupancy conditions

Accommodation can only qualify as a FHL if it passes all 3 occupancy conditions.

2.1 How to use the occupancy conditions

For a continuing let, apply the tests to the tax year – that’s from 6 April one year to the 5 April the next.

For a new let, apply the tests to the first 12 months from when the letting began.

When your letting stops, apply the tests to the 12 months up to when the letting finished.

2.2 The pattern of occupation condition

If the total of all lettings that exceed 31 continuous days is more than 155 days during the year, this condition isn’t met so your property won’t be a FHL for that year.

2.3 The availability condition

Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year (140 days for the tax year 2011 to 2012 and earlier).

Don’t count any days when you’re staying in the property. HM Revenue and Customs (HMRC) don’t consider the property to be available for letting while you’re staying there.

2.4 The letting condition

You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year (70 days for the tax year 2011 to 2012 and earlier).

Don’t count any days when you let the property to friends or relatives at zero or reduced rates as this isn’t a commercial let.

Don’t count longer-term lets of more than 31 days, unless the 31 days is exceeded because something unforeseen happens. For example, if the holidaymaker either:

  • falls ill or has an accident, and can’t leave on time
  • has to extend their holiday due to a delayed flight

If you don’t let your property for at least 105 days, you have 2 options (known as elections) that can help you reach the occupancy threshold:

  • the averaging election – if you’ve more than one property
  • a period of grace election – if your property reaches the occupancy threshold in some years but not in others

3. Averaging election

If you let more than one property as a FHL, and one or more of these properties doesn’t meet the letting condition of 105 days, you can elect to apply the letting condition to the average rate of occupancy for all the properties you let as FHLs. This is called an averaging election.



Comments

Neil Patterson

9:36 AM, 29th May 2020
About a month ago

Hi Roger,

Please see my notes above for HMRC guidance on occupancy qualification.

The key to whether or not you are creating an AST is if the property will be the tenant's main residence during the period.

Michael Bond

18:26 PM, 29th May 2020
About a month ago

I have long understood that a holiday in a FHL must not exceed 28 days; and it must then end. If you want to let a FHL for longer you may let it on out of season "Winter Let" terms for a maximum of 5 months. There is special provision for accelerated possession if your tenant does not leave. There is a special form of tenancy agreement, which a reputable FHL letting agency could provide. None of the days of any tenancy of over 28 days count towards your availability of 210 days or actually let for 105 days. In this specific case you could not count any of the days of your 3 months winter let.

roger

9:36 AM, 30th May 2020
About a month ago

Thank you both for your advice.

Neil: I have now confirmed that the customer will be using our property during a period of leave from work and will still have their main home. So it seems we would not be unwittingly creating an AST.
Michael: Thanks for that, I have reread the HS253 and yes I can see it now: None of the days associated with a long let are to be counted towards the 105 days to qualify. (It seems the 28 days you mentioned are now 31 days in the latest HS253 ).

This has now got me thinking now about the HMRC rules for FHL and the Covid19 pandemic: We have been forced by the government to close for business and with no firm date as to when we can reopen. Will the qualifying dates for FHL be adjusted to allow for these 'un-forseen circumstance' ? Assuming we are allowed to reopen on 4th July we will have been prevented from accepting guests for THREE months.

Challenging times for all.

Roger

silversurfer2017

21:04 PM, 30th May 2020
About a month ago

Reply to the comment left by roger at 30/05/2020 - 09:36
Almost certainly yes. In your first year of trading you do not have to hit the target of 105 days until your second full year. So common sense should prevail and allow you at least one year to get back up to 105 days. In any case I am sure that HMRC will have better things to do than checking up on legitimate FHL businesses that they have fully complied with the 105 day rule during the Covid-19 pandemic. Also the £10,000 business grant was paid out to FHL owners like me precisely because our businesses would be badly hit and unlikely to get many booking in the current tax year. (and also therefore fail on the 105 day test)

Ian McKean

14:52 PM, 3rd June 2020
About 4 weeks ago

I run a business doing FHL's as well as a couple of long term lets, and have suffered cancellations because of COVID-19 of about £24,000 and have the expectation that this figure will have at least doubled by the end of the year, maybe tripled.

But HMRC have rejected our (my wife's and my) claim for help under the Self-Employment Income Support Scheme because they say we are not self-employed. So how is it that you (silversurfer2017) have got a £10,000 business grant?

roger

15:18 PM, 3rd June 2020
About 4 weeks ago

Ian
I cant answer for silverserfer but in our case we also received £10,000 grant. I think it will only apply to FHL on business rates and not the long term let.

If your FHL is let for short periods that total 140 days or more per year it should be rated as self catering property and valued for business rates. (see https://www.gov.uk/introduction-to-business-rates/self-catering-and-holiday-let-accommodation )
You should not be paying council tax.

If you are a small business you will get 'small business rate relief', that should reduce your business rate to zero. You will then have to pay for the refuse to be collected by a commercial contractor as the council will not take it.

If you are claiming 'small business rate relief' for your FHL you would be able to receive the £10,000 Covid19 grant.
See: https://www.gov.uk/guidance/check-if-youre-eligible-for-the-coronavirus-small-business-grant-fund.
I am not sure of the cut off date to apply for this grant, also the gov.uk web site says you do not need to apply as the local council will contact you. This was not the case so I applied through the council website. Very easy, very quick. Payment was received within a week.
Good luck
Roger

Ian McKean

16:50 PM, 3rd June 2020
About 4 weeks ago

Reply to the comment left by roger at 03/06/2020 - 15:18
Thanks very for this information, Roger

silversurfer2017

8:08 AM, 4th June 2020
About 4 weeks ago

Reply to the comment left by Ian McKean at 03/06/2020 - 14:52
Just to clarify, yes the £10,000 grant was because my FHL business, (currently only one property), was registered for business rates. Some holiday let owners with only one property have not registered for business rates and have continued to pay council tax. This is false economy and also misuses the local council's services as waste collection is for domestic collection only and not for a business. (If you register for businness rates you have to make your your private arrangements for waste collection with companies like Biffa or Veolia.) Those that have not registered for business rates will not have been eligible for this grant.

Alan Kahn

6:19 AM, 5th June 2020
About 4 weeks ago

You can agree to let out if they sign 3 separate contracts to split the 3 months


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