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Furnished holiday let tax guide

The global coronavirus pandemic continues to affect the self-catering holiday and tourism sector throughout the UK. Many holiday let owners are understandably concerned about the immediate and long-term impact COVID-19 will have on their business, as guests are forced to postpone or cancel their holiday due to the ‘stay at home’ measures. Following the latest lockdown announcement, 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

The UK government announced a strict England-wide lockdown from 6th January 2021, which will last until at least mid-February. Under the new rules, which are being imposed to halt the spread of the more transmissible COVID-19 variant, people will only be able 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 have been forced to close. Included in this is the provision of self-catering holiday accommodation. The stricter restrictions are being implemented across England, replacing the tiering system.

Read the HMRC COVID-19 advice for accommodation providers

In line with this government advice, self-catering accommodation providers and letting agencies have 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

New lockdown 2021 grant support for holiday let owners

In light of the latest national lockdown across the UK, the Chancellor of the Exchequer has announced new one-off top-up grants for retail, hospitality and leisure businesses across the UK, and a new £594 million discretionary fund to support other impacted businesses. Discretionary payments will be made available via local authorities and devolved administrations.

Click here to find further details of the Chancellor’s announcement.

Click here to find further details on the government guidance on the new lockdown in England, which will became law on Wednesday 6th January 2021.

Below are key points on the new business support measures:

  • The one-off cash payment is 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 will be given to closed businesses according to their rateable value.
  • A further £594 million is also being made available for local authorities and the devolved administrations to support other businesses which are not eligible for the top-up grants but that are affected by the restrictions.
  • Businesses will apply for the discretionary grants through their local authorities in England, and each devolved administration will receive appropriate funding from the UK government to distribute the grants.

Click here to check if your business is eligible for a coronavirus grant due to national restriction.

This new lockdown support is in addition to existing funding, as listed below.

Tax deferral scheme

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.

Income tax deferral:

The deadlines for paying tax bills have 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 is made before this date, you’ll not be charged interest or penalties.

For more information, click here:

Deferral of VAT payments:

Not all holiday let businesses may be registered for VAT, but for those that are, there was the option to defer payment.

If you are a UK VAT registered business and had a VAT payment due between 20th March 2020 and 30th June 2020, you had the option to defer payment. If you deferred between those dates and still have payments to make, you can:

  • Pay the deferred VAT in full on or before 31st March 2021
  • Opt into the VAT deferral new payment scheme when it launches
  • Contact HMRC if you need more help to pay

What is the new VAT payment scheme?

Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022. The online opt in process is will be available early 2021.

Click here for more information:

Business rates relief for holiday home owners

For those owners that currently pay business rates on their holiday let, there is a business rates relief scheme available, which offers a 12-month payment holiday for 2020/2021 for all retail, hospitality and leisure businesses in England.

The government has confirmed it will continue to offer 100% business rates relief for retail, hospitality and leisure businesses, extended to April 2021. If you qualify, you do not need to take any action, your local council will apply the discount automatically.

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-Employed Income Support Scheme(SEISS)

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 four grants. While the first two are closed, the third grant, which covers November 2020 to January 2021, is now open. The fourth grant will be available from the 1st of February to 31st April 2021.

This initiative is offered by the government and gives self-employed individuals a taxable grant worth 80% of average monthly profits, up to £7,500. This is made up of 80% of three months’ worth of average monthly trading profits, capped at £2,500 per month. The grant will be subject to income tax and national insurance contributions, but does not need to be repaid.

Find out how HMRC will work out your income and profits if you’re self-employed or a member of a partnership in the UK and have lost profits due to coronavirus (COVID-19)

Self-employed individuals who pay themselves a salary through PAYE may be eligible for support through the Coronavirus Job Retention Scheme.

Bounce Back Loan Scheme (BBLS)

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

The government guarantees 100% of the loan and there won’t be any fees or interest to pay for the first 12 months. After 12 months the interest rate will be 2.5% a year.

The scheme is open to applications until 31 March 2021.

If you already have a Bounce Back Loan but borrowed less than you were entitled to, you can top up your existing loan to your maximum amount. You must request the top-up by 31st March 2021.

You can find full details of the scheme here:

Coronavirus Business Interruption Loan Scheme (CBILS)

The Coronavirus Business Interruption Loan Scheme (CBILS) supports 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 guarantees 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 at this time.

This scheme is option until 31st March 2021.

Click here for further information or to apply for the Coronavirus Business Interruption Loan Scheme

Furnished Holiday Let occupancy levels

As a result of the ‘stay at home’ measures currently in place, 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

The government provided support to small businesses and those in the retail, hospitality and leisure sectors in the form of two grant funding schemes, the Small Business Grant Fund (SBGF), and the Retail, Hospitality and Leisure Grant Fund (RHLGF).

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.

The next few weeks and months are likely to be extremely challenging for businesses, with those in the holiday letting market no exception. The current situation and governments efforts are changing constantly, and it’s important to make sure that you have the most up to date information.

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:

* 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.