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Holiday Lets Capital Allowance Claims

 

Furnished holiday rental accommodation can be eligible for Capital Allowances in just the same way as any other commercial property. There is however one noteworthy difference, claims can be made not just on lettings in the UK but in fact anywhere in the European Economic Area.

Here is an example which clearly illustrates the significant tax saving benefits Capital Allowances can provide to the owners of furnished holiday rental properties.

Stuart Rivers Associates was asked to conduct a Capital Allowances review of a holiday property in France in 2011 (shown below). The client acquired the property for £800,000 and we were able to find  £160,000 of Capital Allowances with a total tax saving of £32,000 for the client and a first year saving of £1,600.

However, it’s important to note that if the property expenditure had been incurred today, the first year saving would increase to £32,000 in the first year due to the impact of the Annual Investment Allowance.

Those wishing to make a claim need to comply with the following:

  • The furnished holiday property must be let on a commercial basis
  • The property must be available to let for at least 210 days a year
  • The property must actually be let for 105 days or more a year
  • Must not be let to the same person for more than 31 days in the same year

The number of let days can make it difficult for many businesses to qualify. There is however a helpful provision that allows businesses to elect to treat a property as continuing to qualify where otherwise it would fail to meet the requirements. This period of grace is available for up to a maximum of two years after at least one qualifying year, provided that there was a genuine attempt to let the property during the period.

If the property does comply with the criteria above, the claimant will then need to ensure that there are records of the lettings and of the income from those lettings.

It is also important to be aware that any Capital Allowances claimed cannot be used as a relief against other property income; it can only be used against income generated by the furnished holiday letting business.

If you or your business owns commercial rental accommodation and would like to review the Capital Allowances you may be able to claim, please do get in touch.