Are you considering selling your furnished holiday let?

If you are thinking of taking advantage of the high housing prices and selling your furnished holiday let (FHL) in the next few years, you may qualify for Business Asset Disposal Relief (BADR). The relief allows the capital gain to be taxed at a flat rate of 10%, compared to up to 28% for a normal residential property which could save up to £180,000 of tax per person. However, the qualifying conditions are complicated, and advice should be sought at the earliest opportunity to ensure you meet the criteria.

BADR (previously known as Entrepreneurs’ Relief) allows up to £1m of qualifying capital gains to be taxed at 10%. This allowance has been reduced to £1m over your lifetime so if you’ve made any sort of business disposals in the past or plan to in the future then this must be considered.

In order to qualify as an FHL, you must satisfy the following criteria:

• The property must be available for let for at least 210 days in the year
• The property must be officially let to the public for at least 105 days in the year
• No period of occupancy can exceed 31 days and if so then that period is excluded from calculating the actual let condition
• There are reliefs available for years where a property does not meet both conditions i.e. actual let period is less than 105 days due to COVID-19 lockdown restrictions and advice should be sought to see if the relief can be utilised.

As well as satisfying the conditions of being an FHL business, the criteria for qualifying for BADR are complicated with the main conditions being:

• The business must have been trading for at least 2 years prior to cessation
• The property is sold within 3 year of cessation
• The sale must represent the whole or a substantial part of your business.

BADR can provide valuable tax relief on the sale of your FHL business but as the qualifying conditions are complicated appropriate planning in advance of any sale is essential to maximise the chance of obtaining the relief.

With the current climate and much speculation on the expected changes we may face in relation to CGT, this may all change in the coming months so we would recommend you get in touch sooner rather than later to ensure you can benefit from the tax relief available.

If you are considering selling your FHL business and wish to review your options, please contact our EQ leisure team on leisure@eqaccountants.co.uk or by calling one of our offices.