Annex 1: Minor Changes in the Law Change 52: Property income: furnished holiday accommodation: period over which lettings are averaged: section 268
This change alters the period during which lettings are averaged for the purpose of treating infrequently let property as qualifying holiday accommodation from the accounting period to the relevant period (as defined in section 266).
It brings the income and corporation tax codes back into line.
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 (“under-used accommodation”). The requirement in section 504(3)(b) of ICTA is that the accommodation must be commercially let to members of the public for at least 70 days. Section 504(5) of ICTA says that that requirement, for a particular accounting period must be determined by reference to a twelve month period (called the “relevant period” in section 268). That twelve month period will often coincide with the accounting period. But it may not, an example being when the accommodation is first let as furnished accommodation. Then the relevant period begins on the first day in the accounting period that it is so let.
If the company elects for averaging, however, 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 accounting period for which the furnished holiday accommodation and the under-used accommodation was let, is at least 70.
If the relevant period for particular accommodation does not coincide with the accounting period, the accommodation may have been let for more than 70 days during the relevant period but not for more than 70 days during the accounting period. But because the figures averaged in section 504(7) of ICTA are the numbers of days let during the accounting period, specifying the accommodation in an election could not raise the average number of days of letting during that period above 70.
In rewriting section 504(7) of ICTA, section 268(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.