If you are a landlord of furnished holiday accommodation, then you will qualify for tax breaks providing you meet specific criteria. To apply, your property must be available for short term lettings for at least 210 days a year and has been let for 105 days in the year. Longer lets out of season are permitted, but these should not exceed a total of 155 days.
However, due to the pandemic, lettings during the Easter holiday were prohibited in several areas across the country, along with even stricter restrictions during the summer of 2020. This means that the minimum holiday letting criteria of 105 days is unlikely to have been achieved for most properties in the tax year 2020-21.
With this in mind, we have put together some information and tips on tackling these problems.
Overcoming The Problems Caused By The Pandemic
As a holiday accommodation landlord, you can claim a ‘grace period’ for the 2020-21 tax year, which will allow you to retain the favourable tax treatment for your business. In order to qualify, you must be able to prove that you let the property as short term lets for at least 105 days in either 2019-20 or 2018-19. You will also need to show that you plan to let the property again as a holiday rental in 2021-22.
For those with more than one holiday property, the number of rental days will be averaged over all accommodation based on a single tax year, allowing you to meet the 105-day minimum requirement.
What To Do If You Plan To Sell A Holiday Property
If you are planning to put one or more of your holiday properties up for sale, all profits will be subject to capital gains tax (CGT); this is typically charged at 28% for residential property. However, if your property qualified as a furnished holiday let within three years of the sale, you may be able to take advantage of the business asset CGT rate of 10%.
At Digital Tax Matters, our team can help with calculating the tax due on the sale and will recommend the right timing for disposal to maximise the reliefs available. Please do not hesitate to contact us to discuss your plans before agreeing to sell.