furnished holiday let

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    furnished holiday let

    I have a static caravan that we have owned for a few years and last year started to rent it out as we no longer used it. I have since bought another one this year as it seemed to be going well. I didnt think about it too much as i thought they would be taxed just like my furnished rented houses that i also own but apparantley its different.

    What costs can be claimed back - they are both fully furnished and so i dont need to buy anything for it.

    I had an accountant talk to me and he was saying about capital allowances but i dont think i get it! He also told me that if they dont reach the required 105 days rented out etc that they would then be classed as coming under the normal rented properties but i am confused?? Has anyone had any experience with these?

    i know what im doing with the normal houses but with these i just dont get it!

    #2
    ITTOIA 2005 s308 (1) says that "in calculating the propfits of a property business which consists of or includes furnished letting ............"
    s308(3)(b) says "a furnished letting is an arrangement under which a sum is payable in respect of the premises"
    s308(4) says "premises includes a caravan"
    Why does your accontant think that caravans are different?
    What do you not understand about capital allowances?

    Comment


      #3
      hey now your just blinding me with science lol!!

      I meant that he said they were different because you dont claim the normal wear and tear like you do for rented houses and on the tax return you have to declare them seperately from the other rented houses ie under furnished holiday lets. (i thought i could just lump them altogether) The FHL rules are quite strict ie must be rented for 105 days so i was asking him what happens if i didnt meet this target and he said they would then be classed just as normal rented accomodation and that they would then be included with the rented houses on the tax return and not on the FHL bit.
      I phoned the NLA for advice on FHL's and was told that under capital allowances you claim 20% back each year for the cost of the purchase price of the caravan but my accountant said no, it was just things like if i buy something (like a fridge etc). I just dont get the concept of capital allowances as ive been told 2 different things!

      I paid to join the NLA only to be confused by their advice, I paid for an accountant for advice - only to still be confused! I just want to do it right so that 1) i dont get into trouble and 2) that im not paying tax when i shoudnt be

      Comment


        #4
        Sorry Marlene I misunderstood you. I thought that you meant that caravans were not FHLs. So I was trying to say that they were the same as normal FHLs. Sorry.
        Yes they are different from your normal property income in that they are declared seperately. If you do not meet the rules, then, yes, your accountant is right, they get lumped together with the rest of your holiday income.
        In terms of capital allowances, then the NLA is right and your accountant is wrong. Caravans qualify for capital allowances. Show him CAA 2001 s 23 as amended by FA2008 s73(1) no 20.
        I will try to explain briefly what CAs are.
        Items of a capital nature like plant and machinery cannot be deducted from your property income like, say, repairs, cleaning, etc.
        Instead you are given capital allowances at a prescribed rate to cover this expenditure.
        In the tax year 2011/12 the first £100,000 of qualifying expenditure qualifies for 100% capital allowance. This is called an annual investment allowance. After that the rate is 20%.
        After April the annual investment allowance reduces to £25,000 and the balance of expenditure over that qualifies at 18%.

        Comment


          #5
          thank you for that, I appreciate your help, I will go back to him and show him what you have said.

          so just to be clear (i still dont think i am!) can the cost of the caravan be classed as going under the capital allowances bit? so if i bought the caravan for £40k what would i put under capital allowances - 20% of £40k - £8000??? or under capital allowances would it be 100% of the £40k - £40k ?? which one or am i wrong totally? OR Can i not use the cost of the caravan in the capital allowances? Is it just for things that i buy like furniture/white goods etc?

          He told me that FHL's are really good to have as any lossess can be ofset against income (i think thats what he was telling me!) but im just not getting it or seeing why it is so good!

          I really appreciate your help, i felt like an idiot when he was doing all the talking and i was just doing all the nodding lol!!

          Comment


            #6
            Yes the whole of the cost of the caravan is deductible.
            Your accountant is right about the losses. FHL losses are like trading losses and they can be offset against other income.

            Comment


              #7
              ok great, thanks, im getting it a bit more!

              i appreciate your replies.

              Comment


                #8
                I beg to differ on this one. I agree if you buy a fridge or TV, but not the caravan itself. This is equivalent to a claiming for a house through the allowance. You can cover items in the original purchase such as heating systems, and there are a number of consultancies (google them), that will provide a calculation of just how much of the purchase price can be counted towards the Annual Allowance.

                Comment


                  #9
                  Alex if you look in ITTOIA 2005, and CAA 2001 under the sections I quoted, you can see that caravans for FHLs qualify for CAs.
                  I agree if the FHL was a house, then it would not qualify for CAs but, because it is a caravan, it qualifies.

                  Comment

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