Income Tax Act 2007 section 127

UK furnished holiday lettings business treated as trade

Section 127 provides that a UK furnished holiday lettings business is treated as if it were a trade for income tax purposes, allowing the person running it to access the same range of loss reliefs that would be available for a trading loss, subject to certain modifications and restrictions.

• A UK furnished holiday lettings business — meaning commercial letting of furnished holiday accommodation as defined in Chapter 6 of Part 3 of ITTOIA 2005 — is treated as a single trade for income tax purposes during the tax year in which it is carried on.
• This deemed trade encompasses all commercial lettings of furnished holiday accommodation within the person's UK furnished holiday lettings business, and its profits are charged to income tax accordingly.
• Trade loss relief rules in Chapter 2 apply to losses from this deemed trade, but with the omission of the section restricting trade leasing allowances (since a furnished holiday lettings business cannot involve leasing out equipment), and with the exclusion of sections 64 to 82 and 89 to 95.
• Early trade loss relief is denied for a tax year if any of the accommodation was first let by the individual as furnished accommodation more than three years before the start of that tax year; where only part of a letting constitutes furnished holiday accommodation, a fair and reasonable apportionment must be made.

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