Do you own a property that qualifies as a furnished holiday let (FHL)? To qualify the property has to be commercially let for short periods for at least 70 days per year, although this minimum will increase to 105 days from April 2012. There are also some other conditions.
If your property does qualify as a FHL, have you claimed tax relief for all of the equipment included in and attached to that property? FHL properties have advantageous tax rules that permit capital allowances to be claimed for the cost of equipment used in the building, which is not the case for other let residential property.
Since April 2008 it has been easier to claim capital allowances on a range of items attached to buildings that qualify as integral features.
For a typical FHL property capital allowances may be claimed on the following fixtures…
- Bathroom fittings
- Dishwasher
- Cooker
- Fridge-freezer
- Central heating
- Fitted carpets
- Swimming pool
For a new property with fitted kitchen, bathroom and carpets that cost £235,000, perhaps £25,000 would relate to the built-in fixtures. In addition you can claim capital allowances on the cost of furniture and curtains you provide in the property.
Capital allowances must be claimed in your tax return. A capital allowances claim for the tax year 2009/10 should have been included in your tax return submitted by 31 January 2011, but that return can be amended to include a claim before 31 January 2012. If the property is used for private purposes the capital allowance claim must be amended to reflect that private use.
A word of warning: HMRC is considering whether it will continue to accept claims for capital allowances for FHL properties following a Brief it released on 22 October 2010. Clarification of the meaning of this Brief has been requested by the Chartered Institute of Taxation, but has not been provided. In the meantime, if you don’t claim, you don’t get the tax relief.
You refer to Revenue Brief 45/10 and state “HMRC is considering whether it will continue to accept claims for capital allowances for FHL properties.” This brief deals with the definition of a dwelling house for capital allowances purposes and is largely relevant to the multiple occupany accommodation sector rather than FHL’s which are now subject to new rules from April 2011 with capital allowances still being available under the new rules.
The CIOT did specifically comment upon FHL’s in their response to Revenue Brief 45/10. see section 5 of their response at http://www.tax.org.uk/Resources/CIOT/Documents/2010/12/RCBrief4510CIOTcomments.pdf
Accepted, but think the clarification was only sought in respect of historic expenditure as s35 CAA 2001 denies expendiiture in a dwelling house as being eligible for capital allowances only in respect of an ordinary property business, an overseas property business or special leasing of plant or machinery. A FHL business is treated as a separate qualifying activity and not subject to the dwelling house provisions.