Furnished Holiday Lettings Abroad

I saw an article recently regarding a change in the tax treatment for anyone owning a property abroad. I own and let out a holiday villa in southern Spain. Will this change affect me?

1st July 2009

Assuming you satisfy the criteria for your property to be classified as a Furnished Holiday Let (FHL) then the change in the rules will allow favourable tax treatment for any losses on income and any gains you make on the sale of the property.

To qualify as a FHL, the property must satisfy 3 conditions. These are:

1) The property must be available for commercial letting to the public for 140 days in the tax year.

2) The property must be occupied for at least 70 days.

3) It must not be let to the same person for a continous period of more than 31 days. 

The Budget 2009 explained that current UK law allowing only UK properties to benefit from these rules contradicts European law. As a result the HMRC will abolish the FHL rules in April 2010, but in the meantime properties within the European Economic Area (EEA) will come within the regime.

Therefore, assuming your property satisfies the 3 tests above you can apply FHL treatment to your property for the 2007/08, 2008/09 and 2009/10 tax years.  

It is also possible to make retrospective claims for FHL treatment in the 2006/07 tax year, although the deadline set by HMRC to accept these amendments is 31st July 2009, so you must act quickly. If you feel you may benefit from this change, you should contact your nearest TaxAssist Accountant.

By Jo Nockels

Disclaimer: The information provided is based on current guidance (at date of publication) from HMRC and may be subject to change. Any advice shared here is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this information, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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