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Furnished holiday lettings (FHLs) have their own tax treatment, reliant on a set of strict day-count rules. With the impact of Covid-19 on occupancy, business owners may need to take stock of the position.
A property must pass all three tests:
For established lets, tests apply to the tax year (for income tax): and to the 12 months of the accounting period (for corporation tax). There are slightly different rules on commencement and cessation.
If your day count to 5 April 2021 falls short of the letting condition, a 'period of grace election' could preserve FHL status. But you must still meet the other two tests. The election can be available if you have a genuine, demonstrable, intention to let, but can't, for example because of cancellations due to unforeseen circumstances. For the year to 5 April 2021, this can include Covid-19 measures like enforced closure due to lockdown or travel ban. If you have more than one FHL, you may be able to use an averaging election to similar effect. We should be delighted to advise further if you have concerns here.