CG60287 - Reliefs: Replacement of Business Assets (Roll-over Relief): Qualifying Assets: Furnished Holiday Lettings

Roll-over Relief for Furnished Holiday Lettings
Interaction with Private Residence Relief

Roll-over Relief for Furnished Holiday Lettings

Roll-over relief is available for assets used for the purposes of commercial letting of furnished holiday accommodation as defined

  • in ITTOIA05/Part 3 Chapter 6 for Capital Gains Tax and
  • in CTA09/Part 4 Chapter 6 for Corporation Tax on chargeable gains

see PIM4100+. This guidance uses the term FHL to describe property that meets the requirements of the legislation.

TCGA92/S241(3) and (3A) treats all FHL held by a person or partnership or body of persons in the UK as assets of a single trade for the purpose of roll-over relief. On 22 April 2009 HMRC announced that FHL situated outside the UK but within the European Economic Area (EEA) would be accepted as assets of the same trade for the purpose of roll-over relief from the latest of these dates:

  • 1 January 1994
  • the date on which the country in question joined the EEA and
  • the date on which the property was first let as FHL.

The EEA consists of all of those States that are members of the European Union plus Norway, Liechtenstein and Iceland.

For disposals from 6 April 2011 onwards (or, for companies, for disposals in accounting periods beginning on or after 1 April 2011) TCGA92/S241A deems all FHL within the EEA (other than in the UK) to be a single trade for the purposes of roll-over relief. So there are separate deemed trades; one for UK FHL and one for FHL in other EEA states. TCGA92/S152(8) permits gains on FHL of one trade to be rolled over against acquisitions of FHL in the other. So a gain made on UK FHL may be rolled over against EEA FHL, or vice versa as long as the two trades are carried on at the same time or successively.

Interaction with Private Residence Relief

The normal rules of roll-over relief are modified where:

  • a chargeable gain has been deducted under TCGA92/S152 or TCGA92/S153 from the cost of furnished holiday accommodation, and
  • a gain to which Section 222 (private residence relief, see CG64200+) applies accrues on the disposal of that accommodation.

On a disposal of that accommodation, private residence relief under Section 223 is restricted to that part of the chargeable gain which exceeds the amount of the gain rolled over.

As an example, in January 2011, a property which has qualified as furnished holiday accommodation is disposed of for £340,000 giving rise to a chargeable gain of £150,000. The whole proceeds are invested in the acquisition in September 2011 of a qualifying replacement property at a cost of £450,000. The new property is used as furnished holiday accommodation until September 2014 when it becomes the only residence of the owner. The new property is sold in September 2017 for £500,000. The chargeable gain on disposal is computed as follows:

- - £
Consideration for acquisition of new property - 450,000
Deduct chargeable gain on disposal of old property - 150,000
- - 300,000
Proceeds of disposal of new property - 500,000
Gain to which TCGA92/S222 applies - 200,000
Deduct amount by which cost of new property was - -
Reduced - 150,000
- - 50,000
Private residence relief is 3/6 x £50,000 - £25,000
Therefore the chargeable gain is £200,000 - £25,000 = £175,000