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Agricultural Q & A- 01/09/2010
Question:
Have the Government changed the taxation rules on furnished holiday lettings which will affect my self-catering barn conversion?
Answer:
Regarding Inheritance Tax, the rules tightened up under the last Government so that you have to work much harder to gain Business Property Relief for this type of accommodation. The owner has to be much more involved that simply employing agents to run the facility. If this was the case it would be seen as only investment income. Therefore there has to be direct owner participation in the provision of the accommodation/bed and breakfast/laundry, etc. Precise details need to be worked through with your Accountant.
Regarding Capital Gains Tax, business reliefs still apply although again the owner has to be careful not to allow this to fall into simple property investment. However, the Government have already announced a consultation exercise to tighten up taxation for furnished holiday lettings. Effectively the three changes would become effective from the 6th April 2011 (1st April 2011 for Companies) and the proposed changes are to:
• Ensure that furnished holiday letting rules apply equally to properties in the European Economic Area.
• Increase the number of days that qualifying properties have to be available for, and, let, as commercial holiday letting.
• Change the way in which furnished holiday letting relief is given.
In order to qualify for relief an increase from 10 weeks to 15 weeks of actual letting has been proposed and also an increase in availability from letting to 20 to 30 weeks which may be more problematic.
However, these decisions have yet to be finalised as this article goes to press. It is important to keep this in mind with your Inheritance Tax planning and business planning.
For further information please contact our Agricultural specialist Steven Corfield on 01746 760825 or s.corfield@fbcmb.co.uk. Alternatively please visit our website at www.fbcmb.co.uk for further details of our agricultural legal services.