HMRC issues further guidance on FHL abolition

Published: 19th November 2024

The FHL regime will be abolished from 6 April 2025. In response to common issues raised during the consultation process, HMRC has published further guidance to clarify some of the tax implications. It is now confirmed that post 6 April 2025:

• VAT at the standard rate continues to apply to holiday accommodation
• revenue expenses for consumables such as toiletries and cleaning products can continue to be claimed
• writing down allowances/balancing charges or allowances can continue to be claimed on qualifying expenditure incurred prior to 6 April 2025; and
• businesses commencing in 2024/25 may need to meet the occupancy conditions beyond 6 April 2025 to qualify for the FHL regime, but the FHL status will only apply to the 2024/25 tax year.

The guidance stresses that general tax principles continue to apply as the only change is the removal of tax reliefs that currently apply to FHLs.

The guidance also highlights that spouses and civil partners will be taxed on a 50:50 basis for jointly owned property income in the absence of the FHL regime, unless there is a Form 17 in place declaring that the property is owned in unequal shares. Affected couples should consider completing Form 17 prior to 6 April 2025, but note that this must mirror the actual underlying ownership, so it may be necessary to change the beneficial interests.