Whilst the criteria for a property let to be a furnished holiday let are quite stringent, there are some associated tax benefits that are available.
Furnished holiday lettings businesses are eligible for capital allowances on equipment in the property.
Where the business incurs finance costs such as mortgage interest the restriction that applies to other residential property businesses does not apply to furnished holiday lettings.
It should also be noted that qualifying furnished holiday lettings businesses are potentially eligible for a number of important reliefs from capital gains tax.
“Rollover” relief would apply where the proceeds of sale of a property are reinvested in another qualifying asset
It is also possible to claim holdover relief on the gift of the whole or part of property business.
Finally, note also that entrepreneurs’ relief would be available on the disposal of the furnished holiday lettings business.
Presently however a furnished holiday let business gets no relief for Inheritance Tax, however the Office of Tax Simplification have recommended that furnished holiday lettings businesses should qualify for inheritance tax (IHT) business property relief which, if legislated, should mean no IHT payable when the business is passed on during lifetime or on death.