Overview
1321.The sections in this Chapter define the lettings that can qualify for special tax advantages: “the commercial letting of furnished holiday accommodation”. They are based on section 504 of ICTA.
1322.The sections do not themselves provide the tax advantages. That is the function of the particular “relieving” provisions (such as the loss relief provisions) that are cross-referred to.
1323.The primary purpose of this Chapter is to provide a central definition of this particular type of letting, income from which benefits from tax advantages provided for in other Acts.
1324.The location of these sections in a separate Chapter of Part 3 of this Act reflects detailed consideration of the concept of “the commercial letting of furnished holiday accommodation” in the source legislation.
1325.When the provisions which were the predecessors of what are now sections 503 and 504 of ICTA were first introduced they were complete and free-standing in a way which is no longer the case. That is, at that time they:
imported a then very valuable “use trade profits calculation rules” principle; and
set out the full range of the “trading” treatment that lettings qualifying as the commercial letting of furnished holiday accommodation enjoyed, including the equally valuable capital gains tax reliefs.
1326.Since then however the practical significance of sections 503 and 504 of ICTA has been progressively eroded by changes elsewhere:
all property letting now attracts most trade profits calculation rules anyway; and
the detail of the main benefits of furnished holiday letting status is set out elsewhere (in the capital allowances and capital gains tax provisions).
1327.Section 504 of ICTA merely defines the commercial letting of furnished holiday accommodation for the purposes of particular rules, the detail of which is set out elsewhere. And section 503 of ICTA refers only to what might be considered rather less significant advantages: trade-type loss relief and the treatment of profits as earned income and “relevant earnings” for pension etc relief.
1328.Where best to locate the definition of “commercial letting of furnished holiday accommodation” was therefore carefully considered. The conclusion was that readers will intuitively expect to find the central definition of a particular type of letting with the property income rules. And that is so even if the tax advantages are not prescribed in the same place. So it is located in Part 3 of this Act.
1329.This income remains part of the single property business in section 264 and chargeable therefore under this Part.
