If you own one or more furnished holiday lets then the coronavirus pandemic will certainly have had a negative impact on bookings during 2020/21 and possibly 2021/22.
It’s unlikely that the availability and occupation tests will be met, so will the property still qualify as a furnished holiday let?
The good news is that yes, it will, provided of course that certain conditions are met and claims made. Read on to find out more.
What are the usual qualifying conditions?
To qualify as a furnished holiday let (FHL) all of the following conditions must be met. The property must be:
- In the UK or European Economic Area
- Furnished sufficiently to provide for normal occupation
- Commercially let (you must be intending to make a profit)
- Available for letting as a FHL for at least 210 days in the year
- Actually let, on a commercial basis, for at least 105 days in the year (ignoring any lets of more than 31 consecutive days)
During Covid, it is entirely possible that although the property was technically available for letting (as long as you weren’t staying there yourself) that you did not meet the 105-day test for actual lettings.
What if I don’t meet the lettings test?
If you are not able to meet the 105-day test you may be able to benefit from a period of grace election.
If you had a genuine intention to meet the letting condition, but were unable to for some reason (such as a pandemic) then as long as you met the condition in the previous year you can make a period of grace election so that the property continues to qualify as a FHL in this year.
If the letting condition is not met in the next year you can make a further period of grace election to continue to qualify.
If the letting condition is not met in the year after the second period of grace election then if no longer qualifies as a FHL.
For example:
- Year 1 2019/20 Lettings condition met, property qualifies
- Year 2 2020/21 Lettings condition not met, period of grace election made, property qualifies
- Year 3 2021/22 Lettings condition not met, period of grace election made, property qualifies
- Year 4 2022/23 If the lettings condition is met the property can qualify, if it is not then the property will not qualify as a FHL
You must have made a period of grace election for year 2 in order to make one for year 3.
You can make the period of grace election:
- In the property pages of your self-assessment tax return (use Box 19 for 2020/21), or
- Separately from the tax return, up to one year after the 31 January following the end of the tax year (so for the tax year 2020/21 the deadline is 31 January 2023).
If you are unclear about how the pandemic has affected your property, please feel free to get it touch and I’ll be happy to talk you through the options.
