Finance (No. 3) Bill

Session 2010 - 11
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Finance (No. 3) Bill

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 1 — Income tax
215

Schedule 14
Section 52

Furnished holiday lettings
Part 1
Income tax
FA 2004
5
1     (1)
In FA 2004, section 189 (relevant UK individual) is amended as follows.
      (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
10
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
15
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
20
furnished holiday lettings business.”
ITTOIA 2005
2     (1)
ITTOIA 2005 is amended as follows.
      (2)
In section 322 (introduction)—
(a)
after subsection (2) insert—
25
“(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-
30
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),
35
(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
40
exception DA).”,
(b)
in subsection (3), for “the above provisions” substitute “the
provisions mentioned in subsection (2)”, and

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 1 — Income tax
216

(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
5
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)—
10
(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.”
15
      (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,
20
(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—
25
(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
30
(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
35
(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
40
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.

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 1 — Income tax
217

(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”.
5
      (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—
10
(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
15
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
20
(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.
25
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
30
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
35
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.”
40
ITA 2007
3     (1)
ITA 2007 is amended as follows.

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 1 — Income tax
218

      (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).”
5
      (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
10
(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
15
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
20
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
25
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—
30
“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
35
states.”
Commencement
4
Subject to paragraphs 5 and 6, this Part has effect in relation to the tax year
2011-12 and subsequent tax years.
5
Paragraph 2(3) and (4)(a) have effect in relation to the tax year 2012-13 and
40
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
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.

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 2 — Corporation tax
219

Part 2
Corporation tax
CTA 2009
7     (1)
CTA 2009 is amended as follows.
      (2)
In section 264 (overview of Chapter)—
5
(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—
10
(a)
Chapter 4 of Part 4 of CTA 2010 (relief for property
business losses: see section 67A of that Act),
(b)
certain provisions of TCGA 1992 (see section 241A of
that Act), and
(c)
CAA 2001 (see, for example, sections 250 and 250A of
15
that Act).”,
(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
20
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 250 and 250A).”
      (3)
In section 267 (meaning of “qualifying holiday accommodation”)—
25
(a)
in subsection (2), for “140 days” substitute “210 days”, and
(b)
in subsection (3), for “70 days” substitute “105 days”.
      (4)
In section 268 (under-used holiday accommodation: averaging elections)—
(a)
in subsection (3), for “70” substitute “105”, and
(b)
after subsection (6) insert—
30
“(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 268 insert—
“268A
Under-used holiday accommodation: letting condition not met
35
(1)
This section applies if—
(a)
during an accounting period a company lets qualifying
holiday accommodation,
(b)
the accommodation is let by the company—
(i)
during the next accounting period, or
40
(ii)
during the next two accounting periods,
(c)
the accommodation would (apart from this section) not be
qualifying holiday accommodation—

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 2 — Corporation tax
220

(i)
during the accounting period mentioned in
paragraph (b)(i), or
(ii)
during both of the accounting periods mentioned in
paragraph (b)(ii),

only because of a failure to meet the letting condition (see
5
section 267(3)), and
(d)
there was a genuine intention to meet the letting condition for
the period within subsection (1)(c)(i) or each of the periods
within subsection (1)(c)(ii) (as the case may be).
(2)
If the company makes an election in respect of that accommodation
10
for any accounting period in respect of which the failure mentioned
in subsection (1)(c) occurs, the accommodation is to be treated as
qualifying holiday accommodation for that accounting period.
(3)
Subsection (2) does not apply for the purposes of section 268 or
subsection (1)(a).
15
(4)
If an election is not made for the first of the accounting periods
within subsection (1)(c)(ii), an election may not be made for the
second.
(5)
An election for an accounting period must be made within the period
of two years beginning at the end of the accounting period.
20
(6)
References in subsection (1)(a) and (c) to qualifying holiday
accommodation include accommodation treated as such under
section 268.”
      (6)
In section 269 (capital allowances and loss relief), in the heading, for “relief”
substitute “relief: UK property business”.
25
      (7)
After section 269 insert—
“269A
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
30
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—
35
(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 Chapter 2, 4 or 6 of Part 4 of CTA 2010 (loss
relief) applies in relation to a loss made in either of those
40
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.”
      (8)
In section 748 (assets held for purposes of property business)—
45

Finance (No. 3) Bill
Schedule 14 — Furnished holiday lettings
Part 2 — Corporation tax
221

(a)
in subsection (4), for paragraphs (a) to (c) substitute—
“(a)
an ordinary UK property business,
(b)
a UK furnished holiday lettings business,
(c)
an ordinary overseas property business, or
(d)
an EEA furnished holiday lettings business.”, and
5
(b)
for subsection (5) substitute—
“(5)
In this section—
“commercial letting of furnished holiday
accommodation” has the meaning given by section
265,
10
“EEA furnished holiday lettings business” means an
overseas property business so far as it consists of the
commercial letting of furnished holiday
accommodation in one or more EEA states,
“ordinary overseas property business” means an
15
overseas property business except so far as it is an
EEA furnished holiday lettings business,
“ordinary UK property business” means a UK property
business except so far as it is a UK furnished holiday
lettings business, and
20
“UK furnished holiday lettings business” means a UK
property business so far as it consists of the
commercial letting of furnished holiday
accommodation.”
CTA 2010
25
8     (1)
CTA 2010 is amended as follows.
      (2)
In section 65 (UK furnished holiday lettings business treated as trade)—
(a)
in subsection (3), after “Part” insert “(but as modified below)”,
(b)
in subsection (4), omit “Accordingly”, and
(c)
after that subsection insert—
30
“(4A)
Chapter 2 applies as if sections 37 to 44 and 48 to 54 were
omitted.”
      (3)
After section 67 (overseas property business to be commercial or carried on
for statutory functions) insert—
“67A
EEA furnished holiday lettings business treated as trade
35
(1)
This section applies if a company carries on an EEA furnished
holiday lettings business.
(2)
“EEA furnished holiday lettings business” means an overseas
property business so far as it consists of the commercial letting of
furnished holiday accommodation (within the meaning of Chapter 6
40
of Part 4 of CTA 2009) in one or more EEA states.
(3)
For the purposes of this Part (but as modified below) the company is
treated as carrying on a single trade—