Annex 1: Minor changes in the law made by the Act: Change 77: Furnished holiday accommodation: period over which lettings are averaged: section 326
This change alters the period during which lettings are averaged for the purpose of treating infrequently let property as qualifying holiday accommodation from the tax year to the relevant period (as defined in section 324).
Subsections (6) to (8) of section 504 of ICTA allow averaging where a taxpayer lets both furnished holiday accommodation and accommodation that would be holiday accommodation if the test in section 504(3)(b) of ICTA were satisfied in relation to it (the “under-used accommodation”). The requirement in section 504(3)(b) of ICTA is that the accommodation is commercially let to members of the public for at least 70 days. Section 504(4) of ICTA says that that requirement must be determined by reference to a period (called the “relevant period” in section 326) which is:
	the tax year; or
	if the accommodation was not let in the year before (or the year after), one year beginning with the first letting (or one year ending with the last letting) in the tax year.
Where the taxpayer elects for averaging, section 504(7) of ICTA treats the under-used accommodation specified in the election as qualifying holiday accommodation if the average of the number of days during the “tax year” for which the furnished holiday accommodation and the under-used accommodation was let is at least 70.
If the relevant period for particular accommodation is not the tax year, the accommodation may have been let for more than 70 days during the “relevant period” but not for more than 70 days during the “tax year”. But because the figures averaged in section 504(7) of ICTA are the numbers of days let during the “tax year”, specifying the accommodation in an election could not raise the average number of days of letting during that year above 70.
In rewriting section 504(7) of ICTA, section 326(4) provides that the average is to be taken by reference to days during the “relevant period”.
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.