FHL Capital Allowances

FHL businesses are currently eligible for capital allowances. From April 2025, you will only be able to claim a deduction for the cost of replacing domestic items against your rents. Any existing capital allowances pools will be carried forward, and you will be able to continue to claim writing-down allowances on that pool.

Where a holiday letting business commences in tax year 2024 to 2025, the relevant period for the purposes of the occupancy conditions begins on the first day in the tax year (or accounting period) on which letting commences and may extend past April 2025. However, FHL status only applies to the tax year 2024 to 2025, or to 31 March 2025 for companies.

So, what does this all mean for someone who is starting an FHL business in 2024/25?

In order to claim capital allowances for items used in the property, the letting business must begin on or before 05 April 2025 (or 31st March 2025 for companies). For the letting business to begin, a tenant must stay there. It is important to note that the business does not start simply because the property is advertised as available for rent.

Once the letting business has begun, the property must meet both the letting and availability conditions during the first 12 months starting from the first day of a tenant staying in the property.

• Availability condition – Your property must be available for letting as furnished holiday accommodation for at least 210 days in the year. Do not count any days when you’re staying in the property. HMRC does not consider the property to be available for letting while you’re staying there.
• Letting condition – You must let the property commercially as furnished holiday accommodation to the public for at least 105 days in the year. Do not count any days when you let the property to friends or relatives at zero or reduced rates, as this is not a commercial let.

For a new let, both conditions must apply to the first 12 months from when the letting began. This means that the 12-month rental condition will extend beyond 31 March/05 April and into the 2025/26 tax year, despite the FHL treatment being abolished as of the 2025/26 tax year.

To summarise:

• If the first tenant does not stay in the property until 6th April 2025 (01 April 2025 for companies) or later, then no capital allowances can be claimed for new items purchased for use inside the property. This is because the FHL business has not started in the 24/25 tax year.
• If the first tenant stays in the property on or before 05 April (31st March 2025 for companies), but the availability and letting condition are not met for the first 12 months of letting, then no capital allowances can be claimed for new items purchased for use inside the property.
• If the only letting in 2024/25 is to friends or relatives who stay in the property at zero or reduced rates, then this will not count as the FHL having started, and no capital allowances can be claimed for new items purchased for use inside the property.

Jack Hurren
Tax Advisor

For more information, please contact us at: consultancy@vantagefeeprotect.com