When a property qualifies as furnished holiday let (FHL) it can make an important difference to the taxation implications and can be beneficial in some respects. This document discusses the conditions to qualify as FHL, advantages of being a FHL, under-used holiday accommodation elections, treatment of losses, implications of joints held FHLs and VAT on provision of holiday accommodation.

Points discussed within this guidance note:

> Definition of a furnished holiday let

The main advantage of furnished holiday lets is that they are treated like a trade for certain purposes even though they are not actually taxed as trades so there is no Class 4 national insurance charge.  The  business  must be carried on commercially, and with a realistic view to a profit. This note sets out a furnished holiday lettings tax guide, including the three conditions which must be met to qualify as FHL which encompasses specific rules on the number of days available and so on.

>> Territorial scope of the FHL rules

> Under-used holiday accommodation elections

Meeting the three conditions to qualify as an FHL can be difficult. However, the taxpayer is able to make elections that may help under-used accommodation qualify as an FHL.

>> Averaging election

>> Period of grace election

>> Using both elections

> The consequences of being a FHL

> Losses

>> Losses arising in 2010/11 and previous tax years

>> Losses arising in 2011/12 onwards

>> Set off of losses from property business against profits of an FHL business

> Jointly held FHLs

>> Simplified cash basis for property businesses

> Reporting

> Cessation of an FHL business

> VAT on provision of holiday accommodation

>> Potential trap

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