Tax Treatment of Overseas Holiday Lets

Tax Treatment of Overseas Holiday Lets

Holiday lets don't necessarily give as good a return as conventional, long term buy-to-lets, but they do enable some people to get the best of both worlds: having a holiday home and a decent income. Although on the downside there is more administration involved and voids that have to be catered for. Tax treatment rules are changing from April 6 2010, so act now if you need to.

In summary there is deadline looming when current rules will change about the treatment of holiday lets in 2010-2011. So if you are able to and want to take advantage of current tax breaks, now is the time to do it. Overseas holiday lets used to be treated differently, but are currently receiving similar treatment to UK holiday Lets. From April 6th 2010, furnished holiday lets will no longer be treated as business assets, which means there will no longer be the ability to offset losses incurred on running costs, against personal tax bills.

This is likely to affect those making losses, probably those using holiday lets for most personal use. 16 weeks or more paid occupancy tends to generate a profit in most circumstances.

So what qualifies as a holiday let?

Excerpt from HMRC Booklet-Furnished Holiday Lets 1015 22.4.09

Qualifying conditions

"Certain conditions must be met in order to qualify for the tax treatment provided

under the FHL rules:

• the property must be situated in the EEA;

• the business must be carried on commercially, and with a view to a profit;

• Availability: the property must be available for commercial letting as holiday

accommodation to the public for at least 140 days during the relevant 12

month period;

• Letting: the property must be commercially let as holiday accommodation to

members of the public for at least 70 days during the relevant 12 month

period. A letting for a period of longer term occupation is not a letting as

holiday accommodation for the purposes of the letting condition; and

• Pattern of occupation: not more than 155 days must fall during periods of

longer term occupation.

A period of longer term occupation is a continuous period of more than 31 days

during which the accommodation is let to the same person.

For individuals with a continuing FHL business, the relevant 12 month period will be

the tax year to 5 April.

For full details on the qualifying conditions, including the full definition of the relevant

12 month period, please see PIM4112, and PIM4115 for companies.

And what is the current tax treatment?

Excerpt from HMRC Booklet-Furnished Holiday Lets 1015 22.4.09

"Landlords with income from furnished holiday accommodation in the UK are

currently treated as if they are trading for certain tax purposes, as long as they

satisfy certain tests, under the Furnished Holiday Lettings (FHL) rules.

Landlords with income from furnished holiday accommodation elsewhere in the

European Economic Area (EEA) cannot currently qualify for this treatment. They

were treated instead in the same way as landlords of other types of overseas

property, under the property income rules.

This difference may not be compliant with European law. The Government has

decided it should repeal the FHL rules from 2010-11. Until the FHL rules are

repealed, HMRC will regard the FHL rules as applying to furnished holiday

accommodation elsewhere in the EEA.

This note explains the change in treatment for furnished holiday accommodation in

the EEA in more detail."

in the UK. HMRC will now treat the FHL rules as including furnished holiday

accommodation elsewhere in the EEA. Therefore, if an EEA property satisfies all the

other qualifying conditions, it will be a qualifying FHL property for tax purposes.

in the UK and those situated elsewhere in the EEA.

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Always seek professional financial and tax advice on your given situation

Posted May 2009

Property Venture^® is an independent, UK-based agent. We help time-strapped investors and holiday home buyers, buy abroad by guiding through the buying process, so reducing the hassle. Overseas members of NAEA. This means we have been subjected to the membership criteria and have signed up to follow the professional Code of Conduct established to help you, the potential buyer or investor, to buy property with confidence.  

Copyright Property Venture^® 2009