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The operation of a furnished holiday let (FHL) is deemed to be a business and not a property income investment. As such the usual business income and expenditure accounts are prepared.

Specific points:

• Accommodation must be available for short-term letting for 210 days in any one tax year and actually be let for 105 days of the year.
• Accommodation should not normally be in the same occupation for a continuous period of 31 days in a period of 155 days in any one tax year. Long-term letting should not exceed 155 days.
• The ‘occupation’ test can be met by making an election to average periods of occupation of any or all of the FHLs owned.
• Rent must be charged at a market rate.
• The rental profit or losses are kept separate from other non-FHL property, such that losses can only be offset against income of the same FHL business.
• Capital gains tax business asset ‘roll-over’ relief and ‘Entrepreneurs’ Relief’ are potentially available.
• If the property qualified as a FHL last year but failed to do so this year because the actual occupation days were too low, an election can be made to continue to treat as a FHL this year and potentially next year.

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