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Claiming on Capital Allowances Tax Relief for Furnished Holiday Lettings

If you’re an owner of a furnished holiday lettings property, you may be able to claim capital allowances tax relief. Regardless of whether you’re a sole trader, partnership or limited company, you can take advantage of this tax incentive. This is a commonly underclaimed incentive for FHL owners as more generalist financial counsel either aren’t aware or simply mistake these assets as being residential properties which makes them ineligible to claim on. 

So, how does it work?

Firstly, it's important to understand what capital allowances are. They’re a type of tax relief that allows businesses to deduct the cost of certain assets from their taxable profits. For furnished holiday lettings, this can include anything from furniture and fixtures to heating and air conditioning systems.

To claim on capital allowances tax relief, you need to identify the assets that qualify and the amount that you can claim. This is where a specialist comes in. RCK have a team of experts who can carry out a detailed survey of your property and identify all the assets that qualify. Once the survey is complete, they will provide you with a report that outlines the amount of tax relief that you can claim. This report can then be submitted to HMRC as part of your tax return.

RCK Partners are experienced in working on FHL projects that are resulting in significant tax savings for their clients, who were previously unaware of any eligibility. They use in-house RICS certified surveyors, ex HMRC inspectors and CTA qualified individuals, to ensure that the necessary construction expertise, tax case law and evolving tax legislation is leveraged.


What are the qualifying criteria for Furnished Holiday Lets?

1) The property must be located in the UK or in the European Economic Area (EEA).

2) The property must be furnished.

3) The property must be commercially let (you must intend to make a profit).

4) The property must be available for commercial letting as holiday accommodation to the public for at least 210 days in the relevant 12-month period (the tax year).

5) Out of those 210 days, the property must actually be let out for 105 days or more as holiday accommodation.

6) Long term occupation (let for 31 days or more to a member of the public) must not exceed 155 days in the tax year. Any period of long-term letting cannot be counted towards the 105 days of commercial holiday letting required to qualify. 

If the above are met, a Capital Allowances claim is possible.

For acquisitions, you will need to carry out an entitlement check to establish whether a claim is possible. Fortunately, FHLs typically have a history of being used as residential dwellings by previous owners, and as mentioned previously, CAs cannot be claimed on residential properties. As a result, it is highly likely a specialist can verify that no prior claims have been made by previous owners, enabling the current owner to make a claim.

An example of a recent successful claim was on the brand-new development of a £1.25m property. The tax relief generated equated to c. £105k after detailed analysis and reporting was finalised. 

Client Benefits

The benefits of claiming on capital allowances tax relief are clear. By deducting the cost of assets from your taxable profits, you can reduce your tax bill and improve your cash flow. This can be particularly beneficial for furnished holiday lettings, where there may be a significant amount of money spent on unexpected issues, furnishings, and maintenance.

Claiming on capital allowances tax relief for furnished holiday lettings is a complex process, but one that can provide significant benefits for property owners. By working with specialists like RCK Partners, you can ensure that you are claiming everything that you are entitled to. 

To find out more contact: Tom Stenhouse 07361478129