Furnished holiday lets - definition of period of longer term occupation

[Learner77]

Dear Sirs,

INTERPRETATION OF PERIOD OF LONGER TERM OCCUPATION

I let out a property for short term rentals via a major letting firm. When I signed up with them I was told that all their lets were for periods of 31 days or fewer so that they would conform to the furnished holiday lettings rules. The monthly statements I receive show a separate booking reference for each month, even if the tenant is the same person for several months in a row, presumably so that there is never a continuous let exceeding 31 days. I have queried this interpretation with the letting firm and was told "all our leases are for no longer than 31 days which means that you do conform to a Furnished Holiday Let".

I've looked up the rules in the Income Tax (Trading and Other Income) Act 2005, s325 Meaning of "qualifying holiday accommodation". Subsection 6 states "For the purposes of this section a 'period of longer term occupation' is a continuous period of more that 31 days during which the accommodation is in the same occupation otherwise than because of circumstances that are not normal". It seems that the letting firm believe that issuing separate leases, each for fewer than 31 days, means that a lease of eg 93 days to the same person, still conforms to the rules for furnished holiday lettings because it is not continuous. I was also told that this is standard practice throughout the industry. The implication was that HMR&C were aware of this interpretation and accepted it as valid.

Do I have a furnished holiday let or not? I'd be interested to hear the views of your readers.

Regards,

Learner77

[maths]

Others are much better qualified than me to comment on this topic but in the absence of some form of HMRC concession/understanding I would have thought that "....during which accommodation is in the same occupation..." [ITTOIA 2005 s325(6)] is a factual (not legal) test.

Hence someone who de facto stays for say 93 days comprised of three 31 day lets is in occupation for 93 days.

[bd6759]

Cleary if a person occupies a property for 93 days, that is a continuous period of more that 31 days during which the accommodation is in the same occupation.

There is nothing in the definition about being "let". The definition relies solely on occupation, which a simple question of counting days.

[Learner77]

Thanks to those who responded to my query. I take your points - but where the total time occupied exceeds 31 days my agent issues several separate leases of fewer than 31 days so that the period of occupation is not "continuous" in their view. This is the interpretation I am trying to validate.

[AnthonyR]

The legislation is looking for a "continuous period" where it is in the "same occupation". Does somebody else occupy it in between each 31 day lease? If not then it's the same occupation and a continuous period.

It's nothing to do with the lease agreements, it's to do with who occupies it during that period. Is there a break in that person's occupation? If not then it's continuous.

Not so long ago it was standard practice for a lot of advisors to suggest contractor schemes, HMRC didn't like it and are people are going bankrupt as a result. Just because 'everyone's doing it' doesn't mean they should be....

[AdamS93]

Ask yourself, if it was that easy, why isn’t everyone doing it? It doesn’t work.

It will come back and bite you, by then the letting agent will be long gone, probably on a beach 🏖 in the Med’.

[Learner77]

Thanks again to all who have responded to my query. My view was that I did not have a furnished holiday let hence my query to my agent and to this website. It is concerning that a letting agent should be representing to clients that this is a "way around" the legislation. You ask why isn't everyone doing this - but my agent has told me that everyone in the industry is doing this! Thanks again for your comments.

[AGoodman]

I would ask the agent whether he can point to a published HMRC guidance or concession because, if not, it sounds like rubbish. From a professional's standpoint, the argument that repeat leases prevent continuous occupation is (as others have said) very very weak, particularly in the current (and ongoing) climate. I cannot see a tribunal judge buying it if it were ever tested.

AnthonyR mentioned contractor schemes. I would also add film schemes, which were the height of popularity 10/15 years ago but which are all going down in flames in Court, at great personal and financial cost to the "investors" involved (you wouldn't want to risk your knighthood).

Getting a return wrong in this way could also see you at risk of substantial penalties.