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December 20, 2023

Renting Your Holiday Home in the UK for Longer Stays

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Ollie Whitehouse, Streo Founder & CEO
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Important!

The information provided in this content is intended for general informational purposes only and should not be construed as legal advice. It is not a substitute for obtaining legal advice from a qualified professional based on your specific circumstances.

Embarking on a journey to comprehend the rules of renting a holiday home in the UK for extended periods? Let’s simplify the legal landscape without compromising on the nitty-gritty details.

Serviced Accommodation Tax Rules

In the domain of renting, there are specific tax rules for properties classified as Furnished Holiday Lets (the legal term) or Serviced Accommodation (as it is more widely known in the industry).

These rules offer unique advantages, including Capital Gains Tax reliefs, plant and machinery capital allowances, and the inclusion of profits as earnings for pension purposes.

Qualifying as Serviced Accommodation

To be recognized as Serviced Accommodation, your property must:

  • Be situated in the UK or European Economic Area (EEA).
  • Be appropriately furnished for regular use, providing visitors with the right to use the provided furniture.
  • Be commercially let with the genuine intention of making a profit. Even if you rent out of season to cover costs without turning a profit, it’s still considered a commercial endeavor.

Taxation of Serviced Accommodation

All your Serviced Accommodations in the UK are treated as a single business, and the same goes for Serviced Accommodations in other EEA states. Keep distinct records for each property, as losses from one business cannot offset profits from another.

Occupancy Conditions

For a property to qualify as Serviced Accommodation, it must meet three occupancy conditions:

  1. Pattern of Occupation: No more than 155 days of continuous letting in a year.
  2. Availability: The property must be available for letting for at least 210 days in a year (140 days for tax years before 2011-2012).
  3. Letting: Commercially let the property as serviced accommodation to the public for at least 105 days in a year (70 days for tax years before 2011-2012).

Elections for Not Meeting the 105-day Rule

If you fall short of the 105-day letting condition, you have two options known as elections:

  • Averaging Election: An averaging election is a strategic move for those managing multiple Serviced Accommodation properties. The goal is to collectively meet the 105-day letting condition by distributing the days among all the properties. This approach acknowledges that each property may have variations in occupancy rates during the year. Averaging can ensure that all properties meet the letting condition collectively, providing flexibility.
  • Period of Grace Election: A period of grace election comes into play when a property owner genuinely intends to meet the 105-day letting condition but encounters unforeseen circumstances that hinder achieving this goal. These circumstances can range from marketing challenges to cancellations due to extreme adverse weather or other unpredictable events.
You can make an averaging election up to one year after 31 January following the end of the tax year.

When Serviced Accommodation Status Ends

Your property will no longer be considered Serviced Accommodation if it is sold, used for private occupation, or fails to meet the letting condition even with the elections.

Final Insights

Keeping detailed records and understanding the intricacies of occupancy conditions will help you navigate the legalities smoothly and make the most of the benefits provided by Serviced Accommodation tax rules.

Resources

Information taken from:

  1. https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2022?fbclid=IwAR04HH9ekGk6-tjFXT1tFIasdhIX0-rNMDWKokcf-QLnQlcRdU6stF-mJ1I#occupancy-conditions
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