The UK Government announced the abolition of the FHL Tax Regime from April 2025 and despite strong lobbying since, the abolition will go ahead as planned following policy papers published on the 29th of July. This comes as a major blow for owners who will see relief for finance cost restricted, CGT reliefs removed, and capital allowances abolished.
There is still a very valuable silver lining for owners in regard to capital allowances however, but time is of the essence…
If a capital allowances claim is made before April 2025, then any unused pools of tax savings can continue to be claimed beyond this date as means as reducing FHL profits and reducing tax liability until the pool used up. This will provide a much needed cash boost for owners which will potentially generate savings for many years ahead.
There were fears that this benefit would come to an end, but after April 2025, former furnished holiday let properties will form part of the person’s UK or overseas property business and be subject to the same rules as non-furnished holiday let property businesses.
For many years capital allowances claims on FHLs have been widely overlooked. Unbeknown to most owners, they are entitled to claim tax relief on items, known as ‘embedded fixtures’ that were already in their property when it was purchased. Embedded fixtures include plant and machinery such as heating, electric, ventilation systems. Kitchens, bathrooms, fire alarms and much more.
Identifying and valuing these items is very complex, requiring the expert eyes of surveyors and capital allowances specialists, meaning most owners have not reviewed and are missing out on tens of thousands of pounds. This is not service accountants usually provide unless employing the skills of a capital allowances specialist.
Typically around between 20%-30% of the purchase price can qualify for capital allowances, and the average tax savings generated in making a claim is around £35,000 per property.
Owners now find themselves in a situation where if they do not make this one-off claim before April 2025, then they may forfeit their entitlement to this tax relief forever.
If you or your clients own an FHL, now is the time to seek advice on claiming your capital allowances before it is too late, and Eureka are offering free reviews and illustrations to FHL owners.
Contact Eureka if you would like to find more on 02922 803333 or office@eureka-moment.co.uk
Find out more about the Abolition of the Furnished Holiday Let regime here.
For the latest clarification from the UK Government (7th November 2024), find out more here.