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bigduckontax, Accountant
Category: Tax
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In June 2009 I built a new property which gained a completion

Customer Question

In June 2009 I built a new property which gained a completion Certificate on 30th June. This was a second property so on 1st July 2009 I `elected` to have this `New Build` as my main residence for tax purposes. Between July 2009 and March 2015 this `New Build` was rented as a holiday let for, on average, around 28 weeks a year. The remaining unlet weeks were either occupied by me on an occasional basis or were unoccupied. During the entire period July 2009 until early March 2016 the `New Build` was my address for tax/banking/legal/health/vehicle registration and other `admin` purposes. I filed business accounts and tax returns in respect of all income obtained during the period of holiday letting and paid full council tax as a residential property despite `Small business rates relief` being available from the Scottish Government. My understanding was that in the circumstances as outlined I would not have a liability to Capital Gains Tax (particularly as the property was sold prior to the Capital gains Tax rule changes effective from April 2015). Am I correct or am I likely to face a Capital Gains Tax bill ?!
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Here is the guidance from Gov UK on furnished holiday lettings: 'Your property must be available for letting as furnished holiday accommodation letting for at least 210 days in the year (140 days for the tax year 2011 to 2012 and earlier). Do not count any days when you are staying in the property. HM Revenue and Customs (HMRC) do not consider the property to be available for letting while you are staying there.' Your property would not appear to comply ith this condition and is thus not a furnished holiday let. Although you elected to have the new build as your home for Private Residence Relief (PRR) purposes I am of the opinion that you will be liable for Capital Gains Tax (CGT) on a proportion of the gain made on disposal ie that time proportion during which it was rented out. From this can be deducted your Annual Exempt Amount (AEA) of 11.1K plus Lettings Relief (LR) up to 40K. This net gain will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. I am so sorry to have to rain on your parade.
Customer: replied 2 years ago.
Thank you for your reply. I`m afraid I don`t agree with your opinion that the property does not qualify as a `holiday let`
As you say the property has to be `available` for 210 days a year (which it was) but it was not let for that length of time.
It was however let for a period in excess of the minimum number of days, actually rented , which is required for it to qualify which I think is around 90 days.
Regards ***** ***** the `unlet` periods you may be correct although that was not the advice I received previously. Time will tell but if there is any dubiety I will no doubt end up with a fat bill!
Expert:  bigduckontax replied 2 years ago.
Whether it is a furnished holiday let or just a furnished let does not, as my old boss was wont to say alter the price of cheese. You will still be liable for CGT on the sale on a proportionate basis.