Furnished Holiday Let - Fortcoming Tax Changes

spartacus173500

I currently own a second home which is let as a holiday let and currently qualifies under the Furnished Holiday Letting (FHL) tax arrangements .

As I understand if I sell this second home in the current tax year I will be entitled to taper relief and capital gain allowance.

If I leave selling until next financial year there will be no FHL taxation and devery second home will be taxed without any taper relief.
This will make a significant difference to the tax payable.

My question is can I 'sell/transfer' the second home to my two children in the current tax year therefore realising any capital gain this financial year?
( The sale could be seen as part of longer term inheritance tax planning rather than tax avoidance)

Thoughts apprecaited.

silvercar

My understanding was that you lose the ability to put losses on the holiday let against income tax, rather than a change in the way capital gains is calculated.

Taper relief went in April 2007 from memory, so that has already disappeared. You have a capital gains taz allowance of £10,100 per person, if not used elsewhere. Any CGT due is taxed at 18%.

For IHT planning you are best seeing an expert. You could do pass shares in the property to your children each year, rather than incur the tax on the whole gain in one year.

spartacus173500

You're quite right re 'taper relief' - thank you.

I found the attacheded on the HMRC Website - from reading it seems i may be entitled to 'Entrepeneurs Relief'?
I understand these reliefs will not be available for Furnished Holiday Let's from next Financial Year

My question appears to be if I cannot sell in this Financial Year would I be better off selling/transferring to my 2 children.
(Assume Property originally bought in 2000 for £100k, current value approx £200k)

Property used for business purposes

Examples of property which may be used in a business include:

• agricultural land
• farm buildings
• a shop
• a factory or warehouse
• a furnished holiday letting in the UK

If the property counts as a business asset the following reliefs may be available for Capital Gains Tax purposes:

• Business Asset Roll-Over Relief - All or part of your gain may be postponed if you buy another property or certain other assets for business use.
• Gift Hold-Over Relief - If you give away your property all or part of your gain may be postponed until the property is sold. In most cases the person you give it to will pay any Capital Gains Tax.
• Entrepreneurs’ Relief - Your gain may be reduced by four-ninths for the first £1 million of gains. It only applies to sales or disposals on or after 6 April 2008.
• Taper Relief - This reduces your gain. The reduction is based on the length of time you've owned the property and whether it qualifies as a business asset for Taper Relief. It only applies to properties sold or disposed of before 6 April 2008.

Ian_W

Entrepreneurs’ Reliefis outlined in this online factsheet from HMRC.

As silvercar says - you may be better seeking some professional advice before committing to a particular course of action which may have unintended consequences.