Moving parents into an FHL – what would I owe to HMRC

Moving parents into an FHL – what would I owe to HMRC

15:05 PM, 16th November 2017, About 6 years ago 1

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I’ve a tax question concerning furnished holiday lets and personal occupation

In 2016 I bought a flat and spent £20k on renovating it, with a view to making it a furnished holiday let (FHL) in the short term. I also had in mind that in the long term the flat might make a home for my elderly parents, who are starting to have age-related difficulties in their current home.

The flat is now well-established as an FHL and doing a good trade. I intend to claim that £20k as a capital allowance.

If my parents move into the FHL, I assume HMRC will come after me for some of that £20k and any other deductions made as a FHL.

I don’t expect anyone on here to be able to say exactly how much I will owe HMRC, but I would like to know the approximate rules of thumb that HMRC would use to calculate my liability. I assume for example, that a portion of the £20k would fall due for each year that the flat is owner-occupied – i.e. that HMRC would not ask for £20k immediately.

Any thoughts gratefully received.

St Jim’s

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Dennis Forrest

6:50 AM, 18th November 2017, About 6 years ago

You will claim all your capital allowances on your first tax return on the FHL section of the HMRC Property pages of your tax return. I presume you have already done this for the tax year 2016-2017? If you did not start until after 5 April 2017 then claim for all your capital allowances on your 2017-2018 tax return. It is quite usual to make a loss for the first few years of a holiday let because of the high start up costs. This causes no problem - you just carry forward your FHL losses each year until you are in profit. There are no HMRC rules that say you must continue your FHL business for X number of years. You can cease trading at any time and use the property for another purpose or just sell it. Be aware that if you cease trading before you have used up all your FHL losses then these losses will be lost. They cannot be offset against any other type of income - not against any earnings or even against property income from an AST.

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