The furnished holiday let (FHL) rules allow holiday lettings of properties that meet certain conditions to be treated as a trade for tax purposes.

In order to qualify as a furnished holiday letting, the following criteria need to be met:

In addition, the property must pass the following three occupancy conditions.

  1. Pattern of occupation condition. The property must not be used for more than 155 days for longer term occupation (i.e. a continuous period of more than 31 days).
  2. The availability condition. The property must be available for commercial letting at commercial rates for at least 210 days per year.
  3. The letting condition. The property must be let for at least 105 days per year and homeowners should be able to demonstrate the income from these lettings. 

Where there are a number of furnished holiday lettings properties in a business, it is possible to average the days of lettings for the purposes of qualifying for the 105 days threshold. This is called an averaging election.

HMRC provides the following illustrative example:

Emma lets 4 UK holiday cottages for the following number of days in a tax year:

Cottage Number of days
Cottage 1 120 days
Cottage 2 125 days
Cottage 3 112 days
Cottage 4 64 days
Total 421 days

If Emma uses averaging, all 4 cottages will meet the letting condition (421 days divided by 4 = 105). Without averaging, cottage 4 would not qualify.

You can only average across properties in a single FHL business. You cannot mix UK and EEA FHL properties.

Source:HM Revenue & Customs | 24-02-2024