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Property Tax Planning - Could Time Be Gaining On You?

17 September 2014

Do you own a ‘holiday home’, rented out on a short term basis? If so, the rents you receive may be classed as furnished holiday letting (FHL) income.

Changes made some time ago mean that FHL profits are now, broadly, dealt with in the same way as other rental income.  If you own an FHL property, you’ll no doubt be aware that:

  • since 6 April 2011, the ability to relieve FHL losses against other sources ofincome was removed
  • since 6 April 2012, the criteria to qualify as a FHL were tightened up.

The reduced tax advantages might make some landlords consider an FHL sale, but they may be concerned about capital gains tax (CGT) of up to 28% being payable on any gain (generally, this is the difference between the sale price and the purchase price) arising from the disposal.

However, something that property owners may not be aware of is that FHLs are deemed to be ‘business assets’ for CGT purposes, which could result in a 10% rate of CGT applying.  The original draft FHL legislation suggested that this CGT treatment would be withdrawn across the board.  Thankfully, this proposal was not implemented, and, as long as the property meets the new criteria, gains may continue to be taxed at 10%.

It’s important to bear in mind that owners of FHL property which ceased to qualify under the 2012 rules have until 5 April 2015 if they wish to sell their property and still take advantage of the beneficial 10% CGT rate – in very limited situations, this deadline may be extended to 5 April 2017.

Clearly, timing is the key to obtaining the 10% CGT rate on this type of property transaction, especially for those affected by the April 2015 deadline.  If you’d like to discuss any of the above in more detail,  please get in touch with your usual Springfords contact, or alternatively, you can ring us on 0131 440 5000 or email on

This is a general guide which is intended to give background information and is not a substitute for taking specific advice based on your particular circumstances.

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