CA20025 - Plant and Machinery Allowances (PMA): introduction: furnished holiday lettings business (repealed)
Source: gov.uk (2025-03-17)


CAA01/S17 and FA25/Para18/Sch5

Chargeable periods beginning on or after 1 or 6 April 2025

The furnished holiday lettings rules have been repealed from April 2025. Therefore, a UK or EEA furnished holiday lettings business is no longer a qualifying activity for PMAs with effect for:
- accounting periods beginning on or after 1 April 2025 for Corporation Tax purposes; and
- periods of account beginning on or after 6 April 2025 for Income Tax purposes.
With effect from these dates, a business that would previously have been classified as a UK or EEA furnished holiday lettings business will instead be classified as a UK or overseas property business and will be subject to the exclusion for plant or machinery for use in a dwelling-house (CA23060 (https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23060)).

Chargeable periods beginning before 1 or 6 April 2025

For chargeable periods beginning before 1 April for Corporation Tax purposes or 6 April 2025 for Income Tax purposes, UK and EEA furnished holiday lettings businesses were separate qualifying activities for PMAs.

There is guidance on the definition of furnished holiday lettings business in the Property Income Manual starting at PIM4100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4100).

Where the same person carried on more than one of the four categories of property business (an ordinary UK property business, an ordinary overseas property business, a UK furnished holiday lettings business and an EEA furnished holiday lettings business), each would be a separate qualifying activity and PMAs would be calculated and given separately for each.

Transitional rules

Transitional rules apply where:
- 31 March 2025 for Corporation Tax purposes, or
- 5 April 2025 for Income Tax purposes; and
- 1 April 2025 for Corporation Tax purposes, or
- 6 April 2025 for Income Tax purposes.
A "corresponding property activity" means, where both activities are carried on by the same person:
- a UK property business in relation to a UK furnished holiday lettings business, or
- an overseas property business in relation to an EEA furnished holiday lettings business.
Where the transitional rules apply, the person is not treated as having disposed of plant or machinery by reason of:
- the permanent discontinuance of the furnished holiday lettings business, or
- the person beginning to use the plant or machinery for the purposes of the "corresponding property activity".
Instead, the unrelieved qualifying expenditure that would otherwise have been carried forward from the last chargeable period of the furnished holiday lettings business is transferred to the appropriate pool for the "corresponding property activity".

The amount of PMA or balancing charge is to be determined as if anything done by or to the person in carrying on the furnished holiday lettings business had been done by or to the person in carrying on the "corresponding property activity".

For example, if a short-life asset election has been made by the person in respect of plant or machinery used for the furnished holiday lettings business, the election continues to have effect for that person in respect of that plant or machinery for the "corresponding property activity".

The effect of CAA01/S35 (the exclusion of plant or machinery for use in a dwelling-house) is ignored for the purposes of applying these transitional rules.

Example

Bob owns two properties in the Lake District. Bob draws up his accounts to 5 April each year. In the 2024/25 tax year:
- Property A is let to a tenant on a long-term basis for residential purposes; and
- Property B is used for the purposes of a UK furnished holiday lettings business.
Bob is carrying on two separate qualifying activities. Property A is being used for a UK property business. Property B is being used for a UK furnished holiday lettings business. At the end of the 2024/25 tax year, the amount of unrelieved qualifying expenditure in the main pool for each qualifying activity is:
- UK property business (Property A): £12,000
- UK furnished holiday lettings business (Property B): £50,000
As a result of the repeal of the furnished holiday lettings business rules, Property B begins to be used for the purposes of Bob's UK property business for the 2025/26 tax year onwards. Bob was carrying on a UK furnished holiday lettings business in the 2024/25 tax year and is carrying on a "corresponding property activity" (the UK property business) in the 2025/26 tax year.

Therefore, the transitional rules apply, and Bob transfers the unrelieved qualifying expenditure in the main pool for the UK furnished holiday lettings business to the main pool for the UK property business. The amount of expenditure in the main pool for the UK property business for the 2025/26 tax year is £62,000 (£50,000 + £12,000).