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Holiday home
Declaring disposal of property used partly for holiday lets.
My client owns a house that was being used regularly as a holiday home until the outbreak of the Covid-19 pandemic. It had also qualified as furnished holiday accommodation because it was rented out commercially for the required number of days each year.
Since the beginning of 2020, the property has still been available for holiday lettings, but it was not actively marketed. Consequently, for the past two and a half years it has no longer fallen within the holiday accommodation parameters.
The client now wishes to sell the holiday home and has asked for my advice on the capital gains tax implications. I have two questions:
- First, does the property qualify as a business asset for the whole period of ownership or will I have to apportion the gain, with the last two years or so not qualifying?
- Second, must I complete a capital gains tax computation within 60 days of sale or can I simply declare the disposal on the self-assessment tax return as the sale of a business asset?
Readers’ views would be appreciated.
Query 20,007– Vacationer.
VAT status of consultancy business supply.
We have recently been appointed by a couple of unrelated UK companies, both of which have a sole director-shareholder resident in the EU. In each case, the non-UK director provides business consultancy services (standard rated on their own) to UKand EU businesses through the company.
Company A has a UK resident employee which does some ‘fieldwork’ – such as approaching potential clients. The employee works from home using his own equipment (laptop, etc).
Company B owns an investment – UK commercial property let to third parties – alongside the said trading activity. Rental income is £30,000 a year.
The previous accountants managed to register the companies for VAT in the UK. While we have not seen a copy of the application to register, the directors explain that the main aim of doing so was to provide credibility of the business operating in a prestigious market.
We now consider whether our standard-rated accountancy services to the companies have to bear VAT or are subject to the reverse charge applicable to non-UK B2B supplies – bearing in mind that as a matter of fact business is conducted almost entirely from the director’s EU home (other than occasional business meetings in the UK) while our Bristol office serves as the company’s registered office.
We’ve come across an older version (October 2010) of HMRC’s VAT Notice 741 which includes the following example: ‘A company is incorporated in the UK but trades entirely overseas from its head office in the US, which is its business establishment. The UK registered office is a fixed establishment.’ But the updated Notice 741a states in para 3.3: ‘A registered office alone is not sufficient to create a business establishment.’
Could readers comment on the VAT status of our supplies to these clients?
Query 20,008 – Midas.
Furnished room lettings in private residence.
A client has a large home and has recently started to let out ground floor rooms as furnished holiday lets on a room only basis. Each room:
- is furnished and has an en suite bathroom;
- has a separate patio door/French door entrance; and
- has an access door to the main home which remains locked when the room is let so the guests do not have access to the rest of the house.
Each guest has access to part of the gardens and grounds for picnic/BBQ.
When the rooms are unoccupied they may be used by visiting family members free of charge and the interlocking doors are open to the rest of the house.
Is the position any different if one of the rooms was an attic room with separate outside access, but with no interlocking door to the main house?
Do the lettings of the rooms qualify for rent a room relief?
I should be grateful to hear readers’ views.
Query 20,009 – Roomy.
VAT issues on conversion to two houses.
My client is a property developer and has received conflicting VAT advice about a proposed project.
The client intends to purchase the freehold of a public house from a brewery – it is no longer trading – and planning permission is in place to convert it into two semi-detached houses. My understanding is that the sales of the houses will be zero rated.
However, a VAT consultant has said that because the pub includes an owner’s flat on the first floor, the house sales will be exempt from VAT. But another consultant says that this is not relevant because the flat in question did not have its own kitchen and therefore failed the conditions of a dwelling; the flat occupier had to use the kitchen in the downstairs part of the building (ie the pub kitchen). So the pub is wholly non-residential and therefore future sales of the two houses will be zero rated.
Can readers advise on this situation? Is it relevant that the brewery only proposes to charge VAT to my client on 90% of the proceeds because of their option to tax election?
Query 20,010 – Old Vic.
