As part of the 2009 budget, and somewhat out of the public gaze, the chancellor announced that he will be repealing the Furnished Holiday Let rules from April 2010.
For a property which met the letting conditions, furnished holiday lets have benefitted from a number of reliefs not normally available to the owners of let property. For example, whilst the property is let, losses can be offset against other income and Entrepreneur’s & Rollover Relief are available to mitigate the pain of capital gains tax when the property is disposed of.
From April 2010 the property owner will have to be substantially involved with the holiday makers’ activities to continue to qualify for these reliefs. Exactly what ‘substantially involved’ means is unknown at this time. Based on previous guidance relating to Inheritance Tax it could be such as meeting and greeting the holiday makers, doing midweek cleaning, arranging visits on the holiday makers’ behalf or providing breakfast baskets. The Inheritance Tax guidance currently says that the involvement could be direct or through an agent, but this guidance is itself currently under review by the Revenue.
For the owner of a furnished holiday let who will find it difficult to personally dedicate time to the holidaymakers there is therefore a limited window of opportunity in which to dispose of their property and be certain to qualify for the capital gains tax reliefs currently available.