News about the Furnished Holiday Lettings Capital Allowances – Don’t miss your chance to claim
Back in the March Budget the then chancellor Jeremy Hunt announced the withdrawal of the Furnished Holiday Letting rules. We awaited more detail but nothing was forthcoming before parliament dissolved for the election, leaving the future of FHLs in limbo.
Now we have finally learned how the new government will be proceeding on FHLs. The withdrawal of the relief will go ahead and they’ve released guidance and draft legislation setting out the details.
The context – what did the FHL rules do?
The Furnished Holiday Letting regime provided a number of benefits to businesses running operating FHLs including capital gains reliefs, favourable pension interactions and of course, the ability to claim capital allowances on qualifying plant & machinery spend.
There were a number of conditions for a property to qualify, that essentially limited the relief to properties with numerous short term visitors, rather than those closer to a rental property with longer term tenants.
For capital allowances claimed in relation to capital spend incurred on purchasing or improving FHLs, the Annual Investment Allowance would be available, offering full first year allowances on qualifying spend.
The Withdrawal
We now have confirmation that the relief will be withdrawn from April 2025 as planned. Capital expenditure on FHLs incurred after 1st April 2025 (6th April 2025 for individuals) will not qualify for any capital allowances.
One previous unknown was what the change would mean for businesses who’d made claims historically and in the run up to April 2025. Fortunately it seems the withdrawal will not be punitive to previous claimants. From our initial review of the draft legislation it appears no disposal event will be triggered for claimed assets, so allowances will not be clawed back at the end of the scheme. Historic AIA claims will be unaffected and allowances remaining in the capital allowances pools will continue to offer writing down allowances annually beyond April 2025. Losses generated by allowances may be offset against general property business profits beyond April 2025.
This is great news for anyone who has claimed capital allowances on FHLs historically or intends to before the end of the relief.
Don’t miss your chance to claim
If you have or will incur capital expenditure on the purchase and/or refurbishment of a Furnished Holiday Let make sure you claim the allowances you are entitled to, prior to the withdrawal of the relief. For a free consultation get in touch with our Head of Capital Allowances at Cal@yes.tax
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