It was announced in the Spring Budget that the advantageous tax regime for furnished holiday lets (FHL’s) will be abolished from April 2025. This was covered in our Summer 2024 Agricultural Focus and Labour have confirmed that they will go ahead with the Conservative’s plans. With very little detail previously announced on this we now know that:
- Capital allowances will no longer be available for expenditure after April 2025, but it will be possible to continue to claim writing down allowances on pools of expenditure already in existence;
- Losses from a FHL business can currently only be carried forward for offset against the same FHL business, however, it will be possible to utilise these against the profits of the UK (or overseas) property business going forward;
- It will no longer be possible to claim a deduction for the full amount of mortgage interest where the FHL business is owned by an individual after April 2025 and, instead, there will be a tax reduction of mortgage interest at 20% as with other non-FHL residential properties;
- FHL profits will no longer be treated as net relevant earnings for pension purposes;
- Rollover and gift holdover relief are currently available to defer gains made on FHL’s, and on other business asset gains which are reinvested into FHL’s will no longer be available; and
- An anti-forestalling rule will apply to prevent the use of unconditional contracts to obtain business asset disposal relief (if it is still here!) where the contract is entered into on or after 6 March 2024 but not completed until after April 2025. In order to fall outside of these rules, it will be necessary to confirm that the contract was either entered into for wholly commercial reasons or the parties are unconnected and that the purpose of the contract was not to take advantage of the reliefs under the old FHL regime.
If you would like to discuss the FHL changes, please contact our Farms and Estates team below.
