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Tax treatment of a holiday let during the coronavirus pandemic

Q: My client runs a furnished holiday let (FHL). In the past they have met the qualifying conditions but this year, due to covid-19, a lot of bookings were cancelled and so the property has not been occupied for the required 105 days. Will they lose the special tax treatment that FHLs get?

A: Due to lockdown rules, holiday homes were required to close for large parts of the holiday season. As a result, some properties may not meet the letting condition of being occupied for 105 days in the tax year.

However, the property owner can make what is known as a ‘period of grace’ election that allows the property to continue to qualify as an FHL by deeming the letting condition to be met. This election can be made as long as the only reason the property did not qualify as an FHL was due to the 105 day letting condition not being met. The 210 day availability and the no long term lets condition must still be met.