Furnished Holiday Business & Inheritance Tax (IHT)
Your furnished holiday letting business is not a business for IHT relief. If you own a furnished holiday letting business, this will be treated as a trade for most tax purposes. For example, capital allowances are available on furniture, and CGT entrepreneurs’ relief is available on disposal of your business.
However, a recent tax case has determined that a holiday letting business in Cornwall did not qualify for inheritance tax business property relief.
Despite the provision of a range of services to customers, the judge agreed with HMRC that the business was wholly or mainly that of making or holding of investments and, as such, ineligible for any relief from inheritance tax.
From 6 April 2017
Note that, the restricted deduction for interest that started to apply to buy-to-let businesses from 6 April 2017, does not apply to furnished holiday lets. There are special rules you need to follow for your rental business to qualify as furnished holiday lettings; in particular, your property must be available for letting for 210 days a year, and actually let for 105 days.
Lotuswise Chartered Accountants and Business Consultants can help you figure out your tax for your holiday lettings, so please contact us as soon as possible.