The Government intended to abolish the current favourable tax regime for furnished holiday lettings with effect from 5 April 2010 but these plans have been shelved, at least in the short term. The withdrawal of the rules was first announced in the 2009 Budget and legislation had been included in the draft Finance Bill 2010. However, owing to the shortened timetable for passing this year’s Bill through Parliament due to the election, the proposed changes have been abandoned.

The tax benefits associated with furnished holiday lettings include:

• Income tax losses can be set against general income, which is not the case with other rental properties.

• Profits can be treated income for pension purposes.

• Favourable treatment under capital gains tax including entrepreneurs’ and roll over relief.

• Furnished holiday lettings may also qualify for relief from Inheritance Tax.

For your holiday home to be considered a Furnished Holiday Letting for UK tax purposes it must meet the following criteria:

• Available for holiday letting to the public for at least 140 days of the year.

• Furnished so that guests can live in it without the need for extra furnishings.

• Occupied by paying guests for at least 70 days in the year.

• Individual lets should not exceed 31 days and your holiday home must not be let to the same person for more than 31 days in the year.

This is good news, at least in the short term, and tax planning should now be considered to ensure that maximum relief is obtained before any future change is introduced.