1. This tax-favoured investment provides the following main advantages where the property is in the UK or the EEA. They were planned to end on 5 April 2010 but that did not get through the debate on the Finance Bill 2010 so the opportunities are still there:
- CGT entrepreneurs’ relief as a qualifying business disposal
- CGT roll-over relief
- Income tax relief on losses against general income – TO BE REVIEWED WITH CHANGES FROM 6 APRIL 2011 SUBJECT TO CONSULTATION
- Pension scheme funding on the profits
- Capital allowances claimable for plant and machinery, even though used in a dwelling house (this is instead of the 10% wear and tear allowance); the £100,000 AIA is therefore available to this “business” although if you are an owner you may well not plan to spend anything like that amount!
2. The requirements are as follows:
- Commercial letting, which means on a commercial basis and with a view to the realisation of profits.
- Let furnished, so that tenant is entitled to use the furniture.
- Available for commercial letting to the public as holiday accommodation for at least 140 days in a 12 month period (which is the tax year, unless not let furnished in the preceding tax year in which case the period is the 12 months from the first letting; or where not let furnished in the next tax year in which case the period is the 12 months up to cessation) – these requirements are to change from 6 April 2011 subject to consultation, with an increase in the number of days.
- Actually so let for 70 days in the 12 month period.
- Not normally in the same occupation for over 31 consecutive days during a period of seven months in the 12 month period.