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TaxRobin
TaxRobin, Tax Consultant
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Experience:  International tax
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Good evening. We bought two flats in a hotel in Germany for

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Good evening. We bought two flats in a hotel in Germany fixed price each. The flats are fully furnished but we don't have a split of the purchase price between land, property and furniture. We receive a guaranteed rent per year of the flats. How should we treat this income in our tax returns - as normal foreign income from propert or as FHL business in EEA? In the first case can we claim 10% wear and tear from the income? Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  TaxRobin replied 1 year ago.
and thank you me to assist you.
The 10% Wear and Rear allowance is only available Residential Lettings, and NOT Furnished Holiday Lettings.
We should review the differences in the 2 options.
To qualify as a furnished holiday letting (FHL) the accommodation must be in the UK or European Economic Area (EEA) and commercially let.
Commercial means let on a commercial basis and with a view to making
a profit.
The furnished part is evident.
As the property appears to met the above you would have to look to the
1)availability condition, 2)the letting condition, and 3)the pattern of occupation condition.
Under 1) available letting as holiday accommodation to the public least 210 days
Under 2) the accommodation is commercially let as holiday accommodation to the public least 105 days
Under 3) the accommodation must not be let of longer-term occupation than 155 days during the year.
A property cannot be a FHL until it reaches the occupancy threshold 12 month period.
You will want to view the notes on this published by HMRC. Use this url:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/354379/sa105-notes.pdf
You will see the instructions on page UKPN 3.
Customer: replied 1 year ago.

, i was very happy with the answer. However, I had actually written a reply on the Sunday but so far not received an answer. I do not understand the last sentence what it means that a property cannot be FHL until reaches the occupancy threshold 12 month period. If we bouhgt it when it had already been let as FHL than a year does that count?

Thanks,

Annette

Expert:  TaxRobin replied 1 year ago.
The 12 month period is ownership time not the historical use of the property itself. The 12 month period would be from April to April. During that time the property needed to have actually been let prescribed number of days.
As long as it was available 210 it could have been let .
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 13579
Experience: International tax
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