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Our client has furnished holiday lettings within the EEA. Relief has been claimed for losses arising from those lettings against our client’s general income. Unusually but I would emphasise legitimately the loss exceeded £25 000 for 2010/11.
HMRC are now seeking to disallow the excess of the loss over and above the “cap” of £25 000 because the client cannot show active engagement in the business for 10 hours a week (under ITA 2007 s 74A).
I have never heard of the cap applying to furnished holiday letting landlords but I would imagine that few of them would need to spend 10 hours a week dealing with lettings.
Perhaps it has not come up in the past because losses of this magnitude would be rare.
Do readers have any comments?
Query 18 141 – Clutterbuck
Reply from Brumus
It appears HMRC are correct...
