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Furnished holiday let tax guide

Following the government announcement in February 2021 of the four-step roadmap to ease restrictions across England, and the extension of several coronavirus support schemes out lined in the 2021 budget, we’ve updated our guide on COVID-19 UK government financial support for holiday let owners.

In response to this unprecedented crisis, the UK government has instituted a full range of support measures that have been made available to UK businesses. As a holiday let owner you may be entitled to access support schemes, dependent on your circumstances.

Use the quick links below to find out about a particular topic, or continue reading for the full article:

Impact of COVID-19 on self-catering accommodation providers

At the beginning of 2021, the UK government announced a strict England-wide lockdown from 6th January 2021 imposed to halt the spread of the more transmissible COVID-19 variants. These restrictions meant people were only permitted to leave home for a very limited number of essential purposes, and as a result, all non-essential travel and many businesses across all sectors were forced to close, including the provision of self-catering holiday accommodation. The stricter restrictions were implemented across England, replacing the previous tiering system.

Read the HMRC COVID-19 advice for accommodation providers

In line with this government advice, self-catering accommodation providers and letting agencies put in place a variety of policies to allow guests to either postpone or cancel their holiday.

Click here to read our up to date COVID-19 policy for guests

Due to this potential loss of income, holiday let owners may be eligible to receive financial assistance from the government. Depending on the nature of your business the schemes vary significantly –  below we have summarised a few of the government support schemes which may be relevant to you, but please contact your local authorities, government or a legal professional for advice.

UK government financial support schemes for businesses

Since 8th March 2021, restrictions have started to slowly lift in accordance with the government’s four-step roadmap back to a more normal life. In order to support the transition to economic stability, Rishi Sunak, the Chancellor of the Exchequer delivered a raft of new financial measures and the extension to several coronavirus support schemes, in his 2021 budget.

Coronavirus business Restart Grant Scheme

From April 2021, a new Restart Grant with a one-off cash payment was made available for businesses in England to help reopen after lockdown. Hospitality and leisure businesses may be entitled to a one-off cash grant of up to £18,000. This lockdown support is in addition to existing funding as listed below.

Your business may be eligible if:

  • You are based in England
  • Pay business rates on the property
  • Your business was trading on 1st April 2021

Check if you are eligible for the new coronavirus restart grant or find out how to apply on your local council’s website.

New Recovery Loan Scheme

A new Recovery Loan Scheme was launched to replace the existing Bounce Back Loan Scheme (BBLS), which expired on 31st March. The Recovery Loan Scheme ensures businesses of any size can continue to access loans and other kinds of finance, between £25,000 up to £10 million per business, once the existing loan schemes closed. This is to continue, providing support as businesses recover and grow following the disruption of the pandemic. Once received, the finance can be used for any legitimate business purpose, including growth and investment.

The government guarantees 80% of the finance to the lender to ensure they continue to have the confidence to lend to businesses.

The scheme launched on 6th April 2021 and is open until 31st December 2021, subject to review. Loans will be available through a network of accredited lenders.

Find out details of the new Recovery Loan Scheme here.

Extension to VAT cut and deferral of payments

For those holiday let businesses who are registered for VAT, the government will extend the temporary reduced rate of 5% VAT until 30th September 2021, followed by a 12.5% rate for a further 6 months until 31st March 2022.

If you are a UK VAT registered business and deferred  VAT payments due between 20th March 2020 and 30th June 2020, you can:

  • Pay the deferred VAT in full now
  • Join the VAT deferral new payment scheme – the online service is open until the 21st June 2021
  • Contact HMRC if you need more help to pay

If you do not pay in full or make arrangements by these dates, you may be charged a 5% penalty or interest.

Pay your deferred VAT in full

If you were unable to pay in full by 31st March 2021, you may still be able to avoid being charged penalties or interest by either:

  • Joining the VAT deferral payment scheme by 21st June 2021
  • Ensuring you pay your deferred Vat in full by the 30th June 2021

 VAT deferral payment scheme

The new deferral payment scheme is open until the 21st June 2021. 

If you join before this time, you can  make up to eight smaller monthly instalments, interest free.

Click here for guidance on deferral of vat payment due to coronavirus and details on how to join the scheme.

Extended business rates relief for holiday home owners

For those owners that qualified for the previous business rates relief, the government will continue to provide eligible retail, hospitality and leisure properties in England with 100% business rates relief from 1st April 2021 to 30th June 2021. This will be followed by 66% business rates relief for the period from 1st July 2021 to 31st March 2022.

If you qualify, you do not need to take any action, your local council will apply the discount automatically.

The government will legislate that the business rates relief repayments, that have been made by certain businesses, are deductible for corporation tax and income tax purposes.

Many owners whose property qualifies as a Furnished Holiday Let will already benefit from small business rates relief so this scheme won’t be applicable.

You can estimate the business rate relief using the business rates calculator.

Contact your local council if you’re not getting a relief you think you’re entitled to.

Check if your retail, hospitality or leisure business is eligible for business rates relief due to coronavirus (COVID-19)

Self-Employment Income Support Scheme(SEISS) fifth grant

If you are registered and qualify, the Self-Employment Income Support Scheme is open to you. It applies to anyone who reports trading profits through an income tax self-assessment.

The Self-Employment Income Support Scheme is made up of a series of grants designed to support self-employed people whose businesses have been adversely affected by coronavirus. The grant is taxable and is paid out in a single instalment.

Whilst the first four are closed, the fifth grant will be available from late July 2021.

How the fifth grant is different

The fifth grant covering May 2021 to September 2021 and the amount will be determined by how much the turnover of an individual has been reduced in the year April 2020 to April 2021. Additional information and support will be available by the end of June 2021.

  • If there has been a turnover reduction of 30% or more, the grant will pay 80% of three months’ average trading profits up to a cap of £7,500.
  • If turnover is less than 30%, the grant will pay 30% of three months’ average trading profits up to a cap of £2,850.

Find out if you are eligible for the Self-Employment Income Support Scheme fifth grant

Self-employed individuals who pay themselves a salary through PAYE may be eligible for support through the Coronavirus Job Retention Scheme, which has now been extended until 30th September 2021.

Furnished Holiday Let occupancy levels

As a result of the ‘stay at home’ measures previously implemented by the government, some holiday homes may not meet the specific occupancy levels required to qualify as a Furnished Holiday Let (FHL).

If this happens, you may be able to make a period of grace election. This means that as long as you qualified the previous year and can provide evidence that you genuinely intended to meet the letting condition but were unable to do so, the property can still quality as a FHL. If you do fall short on occupancy levels, we would recommend speaking to an accountant to confirm your position.

Visit the HMRC HS253 Furnished Holiday Lettings guide (2020) for further information on the period of grace election.

Previous business support grant funds for holiday home owners

Below are some of the previous support schemes government provided to support businesses and those in the retail, hospitality and leisure sectors. The application dates for these schemes have now closed, but if you think you may be eligible please contact your local council.

The Closed Business Lockdown Payment for holiday let owners – Now closed

The Closed Business Lockdown Payment (CBLP) was introduced following the national lockdown in January 2021, for businesses that were required to close. It meant eligible businesses may have been entitled to a one-off cash grant of up to £9,000 from their local council.

If your holiday let business was previously eligible for the Local Restriction Support Grant (now closed), then you would once again have qualified for the CBLP grant.

Below are key points on the CBLP support measures:

  • The one-off cash payment was provided on a per-property basis for businesses in the retail, hospitality, and leisure sectors.
  • One-off top-up grants of between £4,000 and £9,000 were given to closed businesses according to their rateable value.
  • A further £594 million was made available for local authorities and the devolved administrations to support other businesses which weren’t eligible for the top-up grants but that were affected by the restrictions.
  • Businesses could apply for the discretionary grants through their local authorities in England, and each devolved administration received appropriate funding from the UK government to distribute the grants.

Click here to check for further details on the grant

Bounce Back Loan Scheme (BBLS)  – Now closed

This scheme helped small and medium-sized businesses to borrow between £2,000 and up to 25% of their turnover. The maximum loan available was £50,000.

The government guaranteed 100% of the loan and that there weren’t any fees or interest to pay for the first 12 months. After 12 months the interest rate is 2.5% a year.

The scheme closed on the 31st March 2021.

Click here for guidance on the Coronavirus Bounce Back Loan Scheme

Coronavirus Business Interruption Loan Scheme (CBILS) – Now closed

The Coronavirus Business Interruption Loan Scheme (CBILS) supported small and medium sized businesses with an annual turnover of up to £45 million, to access loans, overdrafts, invoice finance and asset finance of up to £5 million for up to six years.

The government guaranteed 80% of the finance to the lender and pays interest and any fees for the first 12 months. It’s the government’s way of providing a level of guarantee for you to financial institutions in order to encourage the banks to provide finance.

The scheme closed on the 31st March 2021.

Click here for further guidance on the Coronavirus Business Interruption Loan Scheme

Income tax deferral scheme – Now closed

In an effort to relieve cash flow at a time when it is needed most, temporary delays have been offered for tax and VAT payments.

The deadlines for paying tax bills changed. Usually the deadline for paying a tax bill is:

  • 31st January – for any tax owed for the previous tax year on account
  • 31st July – for second payment on account

Because of the crisis, you were given the option to delay making your second payment on account. If you chose to delay, the date for the second payment on income tax moved from 31st July 2020 to 31st January 2021.

As long as the payment was made before this date, you’ll not be charged interest or penalties.

Small Business Grant Fund (SBGF) – Now closed

Under the Small Business Grant Fund (SBGF), all eligible businesses in England in receipt of either Small Business Rates Relief (SBRR) or Rural Rates Relief (RRR) in the business rates system were eligible for a payment of £10,000. If you were eligible, you should have received your grant by 30th September 2020. Contact your local council if you think you’re eligible for the grant but have not yet received it.

Retail, Hospitality and Leisure Grant (RHLG) – Now closed

Under the Retail, Hospitality and Leisure Grant (RHLG) eligible businesses in England with a rateable value up to £15,000 were eligible for grants of £10,000. For businesses with a rateable value between £15,000 and £51,000 were eligible for grants of £25,000.

If you were eligible, you should have received your grant by 30th September 2020. Contact your local council if you think you’re eligible for the grant but have not yet received it.

With holiday cottages now open and with government legislations changing constantly, it’s important to make sure that you have the most up to date information.

Visit the government website to find out more about the COVID-19 Response Spring 2021, detailing the roadmap out of the current lockdown for England.

Click here for details on financial support from the UK government for businesses during COVID-19 pandemic.

While we have done our best to provide an overview of information that may help, we urge you to keep up to date with official government sources and recommend that you seek advice from your local authorities as well as an accountant or legal professional.

Business support pages:

Click here to request your free Owners Guide

* At the time of publishing, Coast & Country Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s business affairs are different, so further advice should be sought from an accountant, legal professional or the UK Government.