Rental Tax Gap Central Housing Group

Government To Plug Rental Tax Gap For Holiday Lets

The government’s much-vaunted rental tax gap produced few challenges to the status quo – but holiday lets are under scrutiny.

Currently the holiday let rental tax gap status is, as most people know, more favourable to investors than buy to let.

This is because HMRC classes a ‘furnished holiday let’ as a business, with consequently lower taxes. Owners must meet certain criteria, chiefly that the home is available to let for 201 days a year and is actually let for at least 105 days, with no single letting exceeding 31 days; and, of course, the property must be fully furnished.

These rules are highly specific but sticking to them is worthwhile in order to be classed as a business.

This would mean paying business rates instead of the usually-higher council tax, while holiday home owners can offset many operating costs against tax, and when it comes to selling the Capital Gains Tax liability is lower than on a buy to let investment.

However, the government appears to have this lettings option as a target.

Yesterday’s announcement on long-term tax reform included the statement: “The government will legislate to change the criteria determining whether a holiday let is valued for business rates to account for actual days the property was rented, following a previous consultation. This will ensure that owners of properties cannot reduce their tax liability by declaring that a property is available for let while making little or no actual effort to do so.”

It continues: “Further details of the change and implementation will be included in the Ministry for Housing, Communities and Local Government’s response to the consultation on the business rates treatment of self-catering accommodation which will be published shortly.”

Otherwise, yesterday’s tax announcements had little new or challenging for agents – to the surprise of many.

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