The measure

As previously announced, changes will be made to tax rules for furnished holiday lettings (FHL) and the regime will be extended to properties sited in the European Economic Area (EEA).

From 6 April 2011, losses made by a qualifying FHL business can only be set against income from the same letting business. In addition, from 6 April 2012, the minimum period a qualifying property must be available for letting to the public in the relevant period is increased from 140 days to 210 days, and the minimum period that the property must be actually let to the public is to be increased from 70 to 105 days.

A 'period of grace' will be introduced to allow businesses that do not continue to meet the 'actually let' requirement for one or two years to elect to continue to qualify throughout that period.

The existing capital gains tax reliefs associated with FHLs will continue to be available.

Who will be affected?

Individuals, partnerships, trustees and companies who let furnished holiday accommodation situated within the UK or anywhere else within the European Economic Area (EEA) and who are liable to UK tax on the income and capital gains from the property.

When?

The changes to loss relief will take effect on 6 April 2011 for individuals and partnerships and 1 April 2011 for companies. The increase in the number of days for which a property is actually let or available in order to qualify for FHL will have effect from 1 April 2012 and 6 April 2012 for companies and individuals (and partnerships) respectively.