CG73500 - Furnished holiday lettings: general
Throughout this manual, all legislative references are to Taxation of Chargeable Gains Act 1992 (“TCGA92”) unless otherwise stated.
Sections 241 and 241A
The special treatment of furnished holiday lettings (FHL) for tax purposes no longer applies from 6 April 2025 (from 1 April 2025 for Corporation Tax purposes). The consequences of the abolition for capital gains purposes are explained at CG73505.
Section 241(2) previously provided that the definition of ‘furnished holiday lettings’ in sections 322 to 328B Income Tax (Trading and Other Income) Act 2005 (“ITTOI”) (for individuals and partnerships) and sections 264 to 269A Corporation Tax Act 2009 (“CTA09”) (for companies), see PIM4100, also applied for Capital Gains Tax (CGT) and Corporation Tax on Chargeable Gains purposes. This applied to properties in the UK and was extended to properties situated within the European Economic Area (EEA) from April 2011 by section 241A.
The guidance at PIM4100 should be referred to if you need to determine whether a property qualified as furnished holiday lettings for the purpose of any of the reliefs mentioned below. See also CG73505 for the transitional consequences of the ending of FHL treatment and for an explanation of the rule preventing certain forestalling arrangements.
Reliefs
Former sections 241(3) & (3A) and 241A(4), (5) & (11)
For periods before 6 April 2025 for CGT and before 1 April 2025 for Corporation Tax the following treatment applied for the purposes of the reliefs listed below
· any UK property business which consists of, or so far as it consists of, commercial letting of furnished holiday accommodation was treated as a trade.
· any overseas property business which consists of, or so far as it consists of, the commercial letting of furnished holiday accommodation in one or more EEA states was treated as a trade.
· all such furnished holiday lettings undertaken by a particular person or partnership was treated as a single trade.
The reliefs to which the above treatment applied are
1. Roll-over relief under sections 152-157, see CG60250C, and in particular CG60281.
2. Business asset disposal relief under section 169H, see CG63950P, and in particular CG63965.
3. Gifts hold-over relief under section 165, see CG66880P.
4. Relief for loans to traders under section 253, see CG65930P.
5. Substantial shareholdings exemption under Schedule 7AC, see CG53000P and in particular CG53007.
An ‘overseas property business’ or ‘UK property business’ takes the meaning as defined in section 989 Income Tax Act 2007 (“ITA07”) or section 1119 Corporation Tax Act 2010 (“CTA10”).
Trade purposes throughout chargeable period
Sections 241 (4) and 241A (6)
The definition of furnished holiday lettings in sections 322 to 328B ITTOIA 2005 (or the CTA09 equivalent) can be satisfied even if the property was only actually let as holiday accommodation during part of the chargeable period in question. If the property satisfied the requirements of ITTOIA 2005 (or the CTA 2009 equivalent), it was treated as being used and used only for trade purposes throughout the chargeable period in question, subject to the following exception.
Sections 241(5) and section 241A(7)
The exception to the rule above is that the property was not to be treated as used for trade purposes at any particular time, if
· it was not commercially let at that time, and
· it was not available to be commercially let at that time.
Any periods during which the property was not commercially let, and was not available to be so let, solely due to the carrying out of any repair or construction work on the property, were to be treated as periods of trade usage.
Example
Laura acquired a cottage in April 2006. She immediately furnished the cottage and made it available for holiday letting.
During the period from April 2006 to October 2008, the cottage was constantly available for holiday letting and was actually let for sufficient periods to satisfy the requirements of sections 322 to 328B ITTOIA 2005.
In October 2008, the property was damaged in a storm. Laura immediately put in hand the necessary repair work which was completed in April 2009. However, she decided not to let the cottage between April 2009 and April 2011.
The lettings recommenced in April 2011 and continued, satisfying the requirements of sections 322 to 328B ITTOIA 2005, until the cottage was sold in April 2024.
The periods of qualifying use, treated as trading for the purpose of the reliefs listed above, are as follows;
· April 2006-October 2008 (actually let);
· October 2008-April 2009 (undergoing repairs);
· April 2011-April 2024 (actually let).
The only period of non-qualifying use was between April 2009 and April 2011.
Property only partly used as Furnished Holiday Lettings, sections 241(7) and 241A(9)
If only part of a property was let as furnished holiday lettings, an apportionment between the part so used and the remainder should be made on a just and reasonable basis. In particular, the approach taken for the purposes of section 52(4), see CG74150P, should be followed.
Private residence relief, sections 241(6) and 241(8)
Where a property which
· has been used for furnished holiday lettings, and
· whose acquisition cost has been reduced as a result of roll-over relief under section 152 or section 153
qualifies for private residence relief (see CG64200C) a special rule applies, see CG65090.