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OCL Accountancy: Furnished holiday letting business impacted by COVID-19 pandemic – have you claimed all available reliefs?

As all readers of this article are aware the COVID-19 pandemic has had a devastating impact on those businesses that operate in the hospitality and leisure sector. Landlords offering furnished holiday lettings (FHL) accommodation have been hit particularly hard.

Landlords were still legally obliged to ensure that properties met required health and safety standards even though they received virtually no income.

The pandemic also meant that several businesses were unable to meet the occupancy condition.

Broadly, in order for a property to qualify as a holiday let it must be available for letting on a commercial basis to the general public for at least 210 days in a tax year and actually let to the general public for 105 or more in a tax year. Letting periods of more than 31 days are not counted unless the let period has occurred as a result of unforeseen circumstances.

Where the 105 day occupation condition has not been met in 2020/21 all is not lost. This is because FHL businesses can make use of two possible elections; a period of grace election or an averaging election.

The first can be used where the landlord genuinely intended to meet the occupancy condition but was unable to do so; it offers landlords a potential lifeline. The availability condition must have been met in the year of claim and the FHL conditions must have been met fully in the previous income tax year. The election can also be reviewed for a second year.

The averaging election can be used where a landlord has more than one holiday let and one or more of the properties doesn’t meet the letting condition. Here an election can be made to average the rate of occupancy across all FHLs.

Time limit for making elections – these must be submitted to HMRC on or before the first anniversary of the normal self-assessment filing date for the year. i.e. an election for the 2020/21 tax year must be made by the 31st January 2023.

For tax saving tips contact us – call Marie Sheldrake, Tom Hulett or Mike Wilcox on 01225 445507