Holiday karma

Is income from letting holiday cottages property or trading income?

In his 2009/10 tax return the taxpayer showed income from holiday accommodation music and farming. After an enquiry HMRC concluded that the income from the holiday cottages was property income from furnished holiday lettings.

The taxpayer appealed saying the holiday cottages income was from a trade.

The First-tier Tribunal noted that a whole letting activity would constitute a trade only if the owner remained in occupation of the property and provided services ‘substantially beyond those normally provided by a landlord’ (HMRC’s Business Income Manual at BIM22001).

The taxpayer argued that occupation was the most important factor. He said that the estate on which the holiday cottages stood should be viewed as a single parcel of land of which he was the occupier.

The tribunal concluded that the taxpayer did not occupy each unit of accommodation and that to treat...