-Many Airbnb lets are used as holiday accommodation and can enjoy some tax advantages over other lets if they meet the right conditions
-To qualify as a furnished holiday letting, an Airbnb let must meet certain conditions with regards to furniture, location, and letting period
-Furnished holiday lettings can be a great way to save money when running a holiday let business, and by understanding the conditions that must be met, serviced accommodation owners can make the most of these tax advantages.
Why qualify as a Furnished Holiday Letting?
There are a few reasons why an Airbnb let might want to qualify as a furnished holiday let. Firstly, this can provide some reductions when you pay tax over other types of lets. Secondly, it may make the property more attractive to potential guests, as they will know that it meets certain standards in terms of furniture and amenities. Finally, it can give the owner of the property some peace of mind, knowing that their property meets all the necessary conditions to be classed as a holiday let.
To qualify as a furnished holiday accommodation, an Airbnb let must meet certain conditions about furniture, location, and letting period. Firstly, the property must be furnished to a high standard, with all the necessary furniture and amenities for guests to enjoy their stay. Secondly, the property must be located in an area that is popular with tourists and holidaymakers. And finally, the property must be let for at least 140 days of the year.
Furnished holiday accommodation classification can be a great way to save money when running a holiday let business. By understanding the conditions that must be met, serviced accommodation owners can make the most of these tax advantages and ensure that their property is attractive to potential guests.
Qualifying Conditions for Furnished Holiday Lettings
As a furnished holiday letting (FHL) owner, there are certain conditions your property must meet in order to quality for FHL treatment. These include:
– The property must be located in the UK or EEA
– The property must be let furnished
Occupancy conditions
As a serviced accommodation owner, there are a few key things you can do to make sure your business is as efficient as possible – and one of them is to make sure you understand the occupancy conditions for furnished holiday lets (FHLs).
There are three occupancy conditions which must be met for a property to be treated as an FHL:
– The pattern of occupancy condition is met if the total of all lettings in the tax year exceeding 31 days is 155 days or less. The nature of holiday letting is multiple short lets rather than longer lets and this condition seeks to recognise this.
– To meet the availability condition, the accommodation must be available for letting for at least 210 days in the tax year. Days where the owner stays in the property do not count as days when the property is available for letting.
– The furnished holiday lettings condition is met if the property is let commercially as furnished accommodation to the public for at least 105 days in the tax year. Only commercial lets count towards this total – any days when the property is let to family or friends at a reduced rate or where they are allowed to use the property for free are ignored.
Longer term lets of more than 31 days are also ignored (unless a let which was supposed to be less than 31 days is extended due to unforeseen circumstances, such as a delayed flight or the holidaymaker becoming ill).
So, what does this mean for you as a furnished holiday let owner? Essentially, it’s important to remember that the key to meeting the occupancy conditions is having short-term lets, rather than longer ones.
Additionally, you need to make sure your property is available for letting for a good chunk of the year – 210 days out of 365, to be exact. And finally, you need to make sure that you’re actually doing commercial lets for 105 days or more each year.
If you can keep all of these things in mind, you should have no problem meeting the occupancy conditions for FHLs – and that means you can save money on your taxes!
Averaging Election for Serviced Accommodation Owners
If you own more than one property that you use as holiday accommodation (whether through Airbnb or a similar service, or otherwise), you can make an averaging election. This allows you to not meet the 105-day letting condition, as long as the average let across all of your properties is at least 105 days in the tax year.
For example, if you have three furnished holiday let properties which were let commercially for periods of 31 days or less, but for at least 315 days in total during the year, the average let would pass the test. This could be a great way to save money if you’re running a holiday let business. Just make sure that you keep good records of the days each property is let, so that you can prove to the tax authorities that you meet the requirements.
Period of grace election
As a serviced accommodation owner, you may be able to make a second election, known as a period of grace election, if you genuinely intended to meet the letting condition but were unable to do so. This will allow your property to continue to be treated as a furnished holiday let (FHL), and could save you money on your taxes.
To make a period of grace election, you must show that you met the letting condition in the previous tax year. If you are unable to do so, you may still be able to make a second election in the following year. However, if the condition is not met in the fourth year after two consecutive elections, your property will no longer qualify as an FHL.
It is important to be aware of the letting conditions for FHLs, as failure to meet them could result in a loss of tax breaks and an increase in your tax bill. If you have any questions about whether your property qualifies as an FHL, please contact us and we will be happy to help.
Lastly, Capital Gains Tax Reliefs
If you make a profit when you sell your furnished holiday let, you may be eligible for further tax relief. This relief allows you to deduct certain expenses from your taxable profit, which could reduce the amount of tax you owe.
To be eligible to claim Capital allowances relief, your property must have been used as a furnished holiday let for at least four years before it is sold. Additionally, the expense must have been incurred “wholly and exclusively” for the purpose of letting the property as a furnished holiday let.
Some examples of expenses that can be deducted from your taxable profit include:
– repairs and maintenance costs
– interest on a mortgage or loan used to purchase the property
– legal and professional fees
If you think you may be eligible for Capital Gains Tax relief, we recommend speaking to a tax professional to ensure that you claim the correct amount.
There are a few things to keep in mind when it comes to furnished holiday lets and taxes. First, remember that the occupancy conditions for FHLs must be met in order to qualify for certain tax breaks. Secondly, you may be able to make an averaging election if you own more than one property that is used as holiday accommodation. Finally, Capital Gains Tax relief may be available if you make a profit when you sell your furnished holiday let.
If you have any questions about how taxes apply to your furnished holiday let, we recommend speaking to a tax professional. They will be able to advise you on the best course of action and ensure that you comply with all relevant tax laws.
Conclusion
As a serviced accommodation owner, it’s important to remember that the key to meeting the occupancy conditions is having short-term lets, rather than longer ones. Additionally, you need to make sure your property is available for letting for a good chunk of the year – 210 days out of 365, to be exact. And finally, you need to make sure that you’re actually doing commercial lets for 105 days or more each year. If you can keep all of these things in mind, you should have no problem meeting the occupancy conditions for FHLs – and that means you can save money and get some tax relief!