Darling delivers blow to holiday-homeowners

A typical British cottage

People who own a holiday-home in the UK will lose a range of tax benefits from next April after a hidden clause in the Budget revealed the holiday lettings rules are to be scrapped.

Under current legislation, landlords who own a holiday property in the UK enjoy several benefits under the Furnished Holiday Lettings (FHL) rules, including being able to write off any trading losses (such as loss of rental income) from their second home on their tax bill and being allowed to postpone any capital gains tax by investing in another property.

A furnished holiday letting business may also be exempt from inheritance tax where the lettings are short-term and the owner is significantly involved with the holidaymakers’ activities.

However, the 2009 Budget reveals these benefits will be abolished from April 2010. The only silver lining is that, until that happens, the FHL rules will be extended to those with qualifying homes within the EU.

The move is likely to infuriate thousands of holiday-home owners who have been relying on the income they’ve received from their second homes.

For a property to qualify as a 'furnished holiday lettings’ it must be furnished, available for letting to holidaymakers for at least 140 days a year and let out for at least 70 days a year - but not occupied for more than 31 days by the same person in any seven-month period.

The property also has to be let out to holidaymakers and tourists in order to qualify.

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