Finance Act 2011

Part 1 U.K. Income tax

FA 2004 U.K.

1 (1) In FA 2004, section 189 (relevant UK individual) is amended as follows. U.K.

(2) In subsection (2), omit the “and” at the end of paragraph (ba), and after that paragraph insert—

“(bb) income which is chargeable under Part 3 of ITTOIA 2005 and is immediately derived from the carrying on of an EEA furnished holiday lettings business (whether individually or as a partner acting personally in a partnership), and”.

(3) After subsection (6) insert—

“(6A) EEA furnished holiday lettings business” means an overseas property business so far as consisting of the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 3 of ITTOIA 2005) in one or more EEA states.

(6B) If there is a letting of accommodation only part of which is holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in an EEA furnished holiday lettings business.”

ITTOIA 2005 U.K.

2 (1) ITTOIA 2005 is amended as follows. U.K.

(2) In section 322 (introduction)—

(a) after subsection (2) insert—

“(2A) It matters whether an overseas property business consists of or includes the commercial letting of furnished holiday accommodation in one or more EEA states for the purposes of—

(a) section 312 (deduction for expenditure on energy-saving items: see section 313(3)),

(b) certain provisions of TCGA 1992 (see section 241A of that Act),

(c) CAA 2001 (see, for example, sections 250 and 250A of that Act),

(d) section 189(2)(bb) of FA 2004 (meaning of “relevant UK earnings” for pension purposes),

(e) Part 4 of ITA 2007 (loss relief: see section 127ZA of that Act), and

(f) section 836(3) of ITA 2007 (jointly held property: see exception DA).”,

(b) in subsection (3), for “the above provisions” substitute “ the provisions mentioned in subsection (2) ”, and

(c) after subsection (3) insert—

“(4) This Chapter also supplements the provisions mentioned in subsection (2A) by providing in certain circumstances for the profits of the EEA furnished holiday lettings part of an overseas property business to be calculated separately (see sections 328A and 328B).”

(3) In section 325 (meaning of “qualifying holiday accommodation”)—

(a) in subsection (2), for “140 days” substitute “ 210 days ”, and

(b) in subsection (3), for “70 days” substitute “ 105 days ”.

(4) In section 326 (under-used holiday accommodation)—

(a) in subsection (3), for “70” substitute “ 105 ”, and

(b) after subsection (6) insert—

“(7) This section is to apply separately in relation to accommodation in the United Kingdom and accommodation in EEA states other than the United Kingdom.”

(5) After section 326 insert—

“326A Under-used holiday accommodation: letting condition not met

(1) This section applies if—

(a) during a tax year a person lets qualifying holiday accommodation,

(b) the accommodation is let by the person—

(i) during the next tax year, or

(ii) during the next two tax years,

(c) the accommodation would (apart from this section) not be qualifying holiday accommodation—

(i) during the tax year mentioned in paragraph (b)(i), or

(ii) during both of the tax years mentioned in paragraph (b)(ii),

only because of a failure to meet the letting condition (see section 325(3)), and

(d) there was a genuine intention to meet the letting condition for the tax year within subsection (1)(c)(i) or each of the tax years within subsection (1)(c)(ii) (as the case may be).

(2) If the person makes an election in respect of that accommodation for any tax year in respect of which the failure mentioned in subsection (1)(c) occurs, the accommodation is to be treated as qualifying holiday accommodation for that tax year.

(3) Subsection (2) does not apply for the purposes of section 326 or subsection (1)(a).

(4) If an election is not made for the first of the tax years within subsection (1)(c)(ii), an election may not be made for the second.

(5) An election for a tax year must be made on or before the first anniversary of the normal self-assessment filing date for the tax year.

(6) References in subsection (1)(a) and (c) to qualifying holiday accommodation include accommodation treated as such under section 326.”

(6) In section 327 (capital allowances and loss relief), in the heading, for “relief” substitute “ relief: UK property business ”.

(7) In section 328 (relevant UK earnings for pension purposes), in the heading, for “purposes” substitute “ purposes: UK property business ”.

(8) After section 328 insert—

“328A Capital allowances and loss relief: overseas property business

(1) If an overseas property business consists of both—

(a) the commercial letting of furnished holiday accommodation in one or more EEA states (“the EEA furnished holiday lettings part”), and

(b) other businesses or transactions (“the other part”),

this section requires separate calculations to be made of the profits of the EEA furnished holiday lettings part and the other part.

(2) The calculations must be made if—

(a) section 250 or 250A of CAA 2001 (giving effect to allowances and charges) applies to the EEA furnished holiday lettings part or the other part, or

(b) any provision of Part 4 of ITA 2007 (loss relief) applies in relation to a loss made in either of those parts.

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.

328B Relevant UK earnings for pension purposes: overseas property business

(1) If an overseas property business consists of both—

(a) the commercial letting of furnished holiday accommodation in one or more EEA states (“the EEA furnished holiday lettings part”), and

(b) other businesses or transactions,

this section requires a separate calculation to be made of the profits of the EEA furnished holiday lettings part.

(2) The calculation must be made if the profits of the EEA furnished holiday lettings part are relevant UK earnings within section 189(2)(bb) of FA 2004.

(3) If there is a letting of accommodation only part of which is holiday accommodation, such apportionments are to be made for the purposes of this section as are just and reasonable.”

ITA 2007 U.K.

3 (1) ITA 2007 is amended as follows. U.K.

(2) In section 117 (overview of Chapter), after subsection (2) insert—

“(2A) This Chapter also makes provision for an overseas property business which consists of, or so far as it includes, the commercial letting of furnished holiday accommodation in one or more EEA states to be treated as a trade for the purposes of this Part (see section 127ZA).”

(3) In section 127 (UK furnished holiday lettings business treated as trade), for subsections (4) to (6) substitute—

“(3A) Chapter 2 applies as if sections 64 to 82 and 89 to 95 were omitted.”

(4) After section 127 insert—

“127ZA EEA furnished holiday lettings business treated as trade

(1) This section applies if, in a tax year, a person carries on an EEA furnished holiday lettings business.

(2) “EEA furnished holiday lettings business” means an overseas property business which consists of, or so far as it includes, the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 3 of ITTOIA 2005) in one or more EEA states.

(3) For the purposes of this Part (but as modified below) the person is treated instead as carrying on in the tax year a single trade—

(a) which consists of every commercial letting of furnished holiday accommodation comprised in the person's EEA furnished holiday lettings business, and

(b) the profits of which are chargeable to income tax.

(4) Chapter 2 applies as if sections 64 to 82 and 89 to 95 were omitted.

(5) If there is a letting of accommodation only part of which is furnished holiday accommodation, just and reasonable apportionments are to be made for the purpose of determining what is comprised in the trade treated as carried on.”

(5) In section 836 (jointly held property), in subsection (3), after exception D insert— “ Exception DA Income arising from an overseas property business which consists of, or so far as it includes, the commercial letting of furnished holiday accommodation (within the meaning of Chapter 6 of Part 3 of ITTOIA 2005) in one or more EEA states. ”

Commencement U.K.

4 U.K. Subject to paragraphs 5 and 6, this Part has effect in relation to the tax year 2011-12 and subsequent tax years.

5 U.K. Paragraph 2(3) and (4)(a) have effect in relation to the tax year 2012-13 and subsequent tax years (but do not have effect in relation to relevant periods which begin before, and end on or after, 6 April 2012).

6 U.K. Paragraph 2(5) has effect where the tax year mentioned in section 326A(1)(a) of ITTOIA 2005 is 2010-11 or a subsequent tax year.