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Ask the Experts: What items and services can I offset against tax when doing my accounts?

Ask the experts…

Q. We are letting our holiday home for the first time this year. What items and services can we offset against tax when it comes to doing our accounts?

A. The Helpful Holidays Team say:

We’re only able to offer general guidance, and you should seek professional financial or legal advice. Our recommendation is to keep careful account of all your income/expenditure and discuss your specific situation with your accountant. You might find the Which? Tax Handbook useful.

However, in general, letting a furnished holiday property (FHL) is deemed a business and you can usually claim against your letting income such items as council and water rates, heating/lighting, building, contents and public liability insurance, maintenance and cleaning, a reasonable level of repairs and renewals, interest paid on borrowings to purchase or improve the property and letting and accountancy fees.

To be allowable as a deduction, an expense must be incurred ‘wholly and exclusively’ for the purposes of the FHL business. This means that if the FHL is used by the owner or friends and family for free or for a reduced charge, some of the expenses will have to be restricted.

It’s worth remembering that a property made available for letting for more than 140 days a year is normally liable for business rates. The Valuation Office Agency (VOA) works out the business rate based on the property type, size and location, and how many people can sleep in it.

HM Revenue & Customs guidance on FHLs is available on the government website.