Any questions: Rentals April 2011

Thursday, March 31, 2011

Any questions: Rentals April 2011

I've heard that the taxation rules for furnished holiday homes are due to change in the next budget. Could you shed some light on this for me?

The new rules for furnished holiday lets (FHL) are due to be applied in two stages. The first set of changes will come into effect in April 2011 and will restrict the use of loss relief from FHLs. When these changes come into place, holiday home trading losses will only be able to be offset against future profits from the same business. Under the existing rules, owners can offset trading losses from a holiday home against any other sources of income, regardless of whether they are related to the holiday home business. For a profitable holiday let business this change should not be a huge concern, however, it could be viewed as a deterrent for new entrants into the market place (who tend to have higher trading costs in the first few years because of the increased cost of setting up the business/preparing the home) and for farmers who currently offset losses against farm or other income.

Further changes will be applied from April 2012, one of which concerns the eligibility criteria for furnished holiday lets tax relief. To qualify for the associated tax breaks, a holiday home must be let for a minimum of 105 days/15 weeks per year (up from 10 weeks) and the property needs to be available to let for at least 210 days/30 weeks in every year (raised from 20 weeks). Given that this change isn't due to take effect for another year, new entrants to the industry as well as owners who are struggling to reach these thresholds, have a fair amount of time to focus their marketing efforts and increase their occupancy.

To contain the initial impact of the changes a "period of grace" will be introduced to allow business that don't continue to meet the actual let period for one/two years to elect to qualify throughout the period. So if you are struggling to meet the eligibility criteria year on year, this will essentially give you some time to get back on track, supporting any long-term ambitions to be a thriving holiday let business. You should of course contact a financial advisor for more detailed advice about the proposed changes.

At the end of last year I bought a villa in the northern Costa Blanca, which I plan to rent out. Advance bookings for the summer are looking healthy, as I'd expected, however until about mid-May the property will be empty for long stretches. This worries me a little as I haven't had a chance to get to know the neighbours or someone local who I could ask to keep an eye on the property, and I'd prefer to know it was being checked regularly. Any advice would be welcome.

In the first instance, the best way to put your mind at rest would be to ensure that you have all the security essentials in place - you may want to consider having the locks changed after purchasing a home, even if it is brand new. Secure your windows and consider investing in a timer switch for the lights. As for having someone to check your property, you might want to get a key holder or cleaner through a trusted agency or property management company. This could prove particularly significant for protecting your insurance - check with your buildings and contents insurance provider, or dig around the small print of your policy for a 'minimum vacancy clause'.

Until you build good relationships with your neighbours and feel that you can ask them to regularly check your property, a key holding company could be a trusty interim solution. Shop around for a company that may also be able to handle all aspects of a changeover such as arranging cleaning, key holding and a "meet and greet service". A good way to source a reputable agency is word of mouth.


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