18 Jul 2022
The furnished holiday let (FHL) rules allow holiday lettings of properties that meet certain conditions to be treated as a trade for some specific tax purposes. As an FHL is treated as a business, it is important to remember that VAT must be accounted for on furnished holiday lettings once the VAT registration threshold is surpassed.
This means that all FHL income would be subject to VAT at the 20% standard rate once the VAT registration threshold, currently £85,000, is breached. Anyone with an FHL with gross rentals exceeding £85,000 in the previous 12 months or expected to exceed £85,000 in the next 30 days is required to register for VAT. If the owners of an FHL business already hold a VAT registration in relation to other business activity, then the FHL income would be subject to VAT from the start. Of course, VAT registration may offer some benefits in allowing for the VAT recovery on refurbishment, maintenance and day-to-day running costs associated with the property in question.
In order to qualify as a furnished holiday letting, the following criteria need to be met:
In addition, the property must pass the following 3 occupancy conditions.