Update from Matt Jeffery, Managing Director of Zeal Tax
Following the announcement of the draft legislation to abolish the FHL tax regime in July 2024, HMRC provided a consultation period for taxpayers and their advisors to provide feedback on the new rules and seek clarification on how the new rules would be applied.
Full details of the draft legislation can be found here on the GOV.UK website.
On 7 November 2024, HMRC published a policy paper to provide clarification on the common issues and questions that arose from the consultation. Fortunately, the policy paper did not include any surprises in terms of how the new legislation will be applied.
It did not, however, confirm if there will be any changes to the draft legislation or confirm that it will become law from 5th April 2025 (1st April 2025 for companies). We must, therefore, assume that the new legislation will be included within Finance Act 2025 and that there will be no changes to the legislation published in July 2024.
The key points to be aware of are:
- No changes to VAT for holiday lets.
- Last date to incur capital expenditure and claim capital allowances will be 5th April 2025 (1st April 2025 for companies).
- Last chance to pool unclaimed capital allowances will be in 2024/25 tax return. This will theoretically mean that a claim for capital allowances can be made in an amended 2024/25 tax return until 31 January 2027. The deadline will be similar for companies but will depend on the company year end.
- FHL’s commencing in 2024/25 tax year can still qualify as an FHL in 2024/25, even if they start part way through the tax year and can’t meet the full letting days criteria. In these circumstances, the letting days criteria is assessed on the 12 months following the date the business commences (i.e. when first available for let).
- Qualifying as an FHL in 2024/25 will enable owners to claim capital allowances on their set up costs and part of the purchase price of the property, construction or refurbishment costs. For more information on capital allowances, download Zeal’s free guide to capital allowances for holiday lets via this link.
- The change in legislation does NOT constitute the cessation of the business. Cessation of a business is when there are no further bookings and no intention to resume the same activity in the future.
- To be able to benefit from CGT reliefs on sale (i.e. Business Asset Disposal Relief), the business must cease before 6th April 2025.
- Joint owners of property that are NOT spouses or civil partners, may share profit in unequal proportions if they operate as a commercial partnership and have a partnership agreement that confirms that profit share ratio.
- Joint owners of property that are spouses or civil partners will need to share profits equally. HMRC have, however, confirmed that you can notify them of unequal shares of profits using Form 17. A Declaration of Trust will be required.Â
The full publication can be found on the GOV.UK website here.
Disclaimer by Zeal
This article was written by Matt Jeffery of Zeal Tax, a leading capital allowances specialist firm in the UK, as an educational piece to help furnished holiday let owners. Matt can be contacted either by calling 01633 287898 or by email on hello@gozeal.co.uk.
The information provided in this article is of a general nature. It is not a substitute for specific advice in your own circumstances. You are recommended to obtain specific advice from a professional before you take any action or refrain from action. Whilst we endeavour to use reasonable efforts to furnish accurate, complete, reliable, error free and up-to-date information, we do not warrant that it is such. We and our associates disclaim all warranties.