HMRC are presently consulting with interested parties with the intention of changing the rules for the tax treatment of FHL property from April 2011.

We thought readers would be interested in the specific proposals being discussed:

1.Currently, a property must be available for commercial letting to the public for 140 days and be let for at least 70 days. The intention is to extend these periods to 210 days and 105 days respectively.
2.Currently, losses created by the letting of FHL property are available to set off against other income of the same tax year. It is now possible that this will be restricted from April 2011 such that you could only carry losses forwards to set off against future FHL profits.
3.Currently, if you make a claim for capital allowances by concession you are allowed to claim even in years when FHL status is denied. From April 2011 if a property does not qualify a claim for capital allowances will be denied.
Planning opportunity

For those of you who have qualifying FHL property in the UK or EC there is a planning opportunity between now and April 2011 that you should consider.

In particular:

1.If you are considering a significant refurbishment, new furniture, kitchen etc, that will qualify for capital allowances in 2010-11, you may be advised to quantify the tax advantage of doing so. The current Annual Investment Allowance is £100,000.
2.If you made a tax loss as a result of a claim for capital allowances, you may be able to set the loss against other income and recover tax already paid.

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