PracticeConsultingTax – Questions & Answers.

Tax - Questions & Answers.

Each month Frank Haskew and Francesca Lagerberg of the ICAEW’s tax faculty provide advice on topical tax issues

Q: For several years I have let out a holiday home in Northumberland which has satisfied all the rules to qualify as a furnished holiday letting for tax purposes. However, due to the outbreak of foot-and-mouth disease, this year I will not be able to let the property out for enough days to meet the Inland Revenue’s requirements. What can I do?

A: Help is at hand in the form of a special tax bulletin issued jointly by the Inland Revenue and Customs & Excise to deal with many of the tax issues surrounding foot-and-mouth disease.

Income from furnished holiday lettings, which satisfy certain qualifications, is broadly treated as trading income rather than being taxed under the less advantageous Schedule A rules.

The properties are also treated as business assets for capital gains tax taper relief.

The qualifying conditions include the properties being commercially available to the public for a set period of time (140 days in a year) and actually let for 70 days.

With the fall-off in the tourist trade in certain areas, many holiday lets may not meet the qualifying conditions. Therefore, the rules are being relaxed for 2000/01 and 2001/02.

For the tax years 2000/01 and 2001/02, if an established furnished holiday letting business satisfied the tests in 1999/2000 or 2000/01 but is prevented from doing so by foot-and-mouth in 2000/01 or 2001/02, then the failure will be disregarded and the furnished holiday letting rules will be deemed to be satisfied.

This concession will enable losses to be offset against other income.

A special foot-and-mouth helpline has been set up to answer any queries on related issues. Call 0845 3000 157.

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