Government support for Furnished Holiday Lets

The Government has introduced various support schemes and grants to help individuals and businesses through the Coronavirus crisis (details can be found on our Coronavirus support hub).

In this article, we will focus on the main areas of support which may be of benefit to Furnished Holiday Let (FHL) businesses and owners.

Income tax deferral

Under usual circumstances second payments on account towards income tax for the 2019/20 tax year would have been due for payment by 31 July 2020. However, the date for this payment has been moved to 31 January 2021, providing welcome cash flow relief for many. This is an automatic deferral and does not need to be applied for. However, if you wish, you can still make the payment as normal.

VAT deferral

If your FHL business is VAT registered, the Government have introduced a VAT deferral scheme. This allows you to defer any payments of VAT due between 20th March 2020 and 30th June 2020 until the end of the 2020/21 tax year. This is an automatic scheme and you do not need to apply if you wish to take advantage of this. Again, if you still want to pay the VAT due then you can do so. Please note the requirement to submit your VAT return by the deadline remains unchanged.

If you are paying HMRC by direct debit and do not want to pay the VAT until 2021, it is vital that you cancel your direct debit in plenty of time, otherwise HMRC will collect the payment as normal.

Business rates reliefs

For those FHL businesses that pay business rates, the Government have announced a 12-month business rates holiday for 2020/21 via the ‘Expanded Retail Discount’.

Most FHL businesses would already have already qualified for the small business rates relief, so this will not benefit the majority. However, it will certainly be beneficial for larger FHL businesses and complexes.

Unfortunately, for those paying council tax, there is no additional relief scheme.

Grant Support

In addition to the business rates holiday, there is also grant funding available that owners of FHL businesses may be able to benefit from via the Small Business Grant Fund and the Retail, Hospitality and Leisure Grant. The grants available are:

• £25,000 if your rateable value is between £15,000 and £51,000

• £10,000 if your rateable value is below £15,000 or in receipt of small business rates relief

Eligible businesses should already have been contacted by their local authority. If you have not yet received an application for a grant and you think you may be eligible, we would recommend that you contact your local authority as soon as possible.

Self-employed income support scheme

We have received several enquiries from owners of FHL businesses to see if they will qualify for this scheme, on the basis that income is reported and tax is paid through a self-assessment return rather than Pay As You Earn (PAYE).

Unfortunately, at the point of writing, the guidance issued by the Government does not class profits arising from FHL businesses as trading profits for the purpose of the grant, therefore disqualifying FHL owners from applying.

Other factors to consider

The impact on the tourism industry of the Coronavirus pandemic and subsequent lockdown will potentially mean that some FHL owners will not achieve the qualifying day counts this year for their property to be classified as an FHL (and therefore benefit for favourable tax treatment).

A period of grace election can be made so that the FHL business continues to qualify for the current year and potentially for the year after that. This is however dependent upon the FHL business qualifying in the year proceeding the election. If the business did not qualify, then a period of grace claim will not be available.

If the FHL is mortgaged, it is possible to request a mortgage repayment holiday from the lender. Interest will continue to accrue on this however, but it may provide vital cashflow relief.

Conclusion

As owners of FHL businesses have complex tax status, the impact of the measures detailed will vary from one business to another based upon circumstances.

If you would like to discuss these further, then please do not hesitate to contact your local Simpkins Edwards office.