Annex 1: Minor changes in the law made by the Act: Change 76: Furnished holiday accommodation: permitted longer-term occupation: section 325
This change alters the period during which, in order to qualify for the special tax treatment of the commercial letting of furnished holiday accommodation, the accommodation must not be occupied for more than 31 days at a time.
Section 504(3) of ICTA provides:
“(3)Accommodation shall not be treated as holiday accommodation for the purposes of this section unless–(a)it is available for commercial letting to the public generally as holiday accommodation for periods which amount, in the aggregate, to not less than 140 days;(b)the periods for which it is so let amount in the aggregate to at least 70 days; and(c)for a period comprising at least seven months (which need not be continuous but includes any months in which it is let as mentioned in paragraph (b)) it is not normally in the same occupation for a continuous period exceeding 31 days.”
It is not clear whether a “month” for the purposes of paragraph (c) means a calendar month (in the sense of January, February, etc) or any period of one month. It is also not clear whether any breaks in the period of at least seven months can fall at any time or must divide the period into periods of whole months. The better view seems to be that any period of a month during which the accommodation is commercially let to members of the public as holiday accommodation must not overlap with any period during which it is continuously in the same occupation for more than 31 days.
A further uncertainty is whether, for the purposes of paragraph (c), the time that the accommodation is “let as mentioned in paragraph (b)” is 70 days or (which is the better view) all the time that it is commercially let to the public generally as holiday accommodation.
On the latter reading, section 504(3)(c) of ICTA secures that accommodation is not let as holiday accommodation if it is let for more than 31 days continuously (otherwise than because of circumstances that are not normal). Section 325(4) gives effect to this reading.
This reading also reduces to less than five months the total periods during which the accommodation can be in the same occupation for more than 31 days. This can operate capriciously to extend the period of “at least seven months” where the holiday lettings are spaced out throughout the year and not concentrated in a few months.
In section 325(5), the requirement in section 504(3)(c) of ICTA is relaxed so that the periods for which the accommodation is continuously in the same occupation for more than 31 days must not amount to more than 155 days (the aggregate length of the five longest months) during the relevant period (see section 324). This means that the period during which any occupation of the accommodation must be on a short-term basis:
	need not be composed of whole months but can be made up of non-consecutive days; and
	is never extended beyond 155 days.
So, where two or three days of a holiday letting fall in a particular month, the requirement in section 325(5) of this Act (unlike section 504(3)(c) of ICTA) does not restrict what can be done with the accommodation during the rest of the month (provided that the condition is satisfied over the relevant period as a whole).
This change is in taxpayers’ favour in principle and may benefit some in practice. But the numbers affected and the amounts involved are likely to be small.