Business Asset Rollover Relief and Air BnB

Oct 8, 2021

Air BnB Furnished holiday lettings have a number of tax advantages compared to standard residential lets. One of the key ones is the availability of business asset rollover relief. This enables furnished holiday let owners to sell one property and invest in another without immediately crystallising any associated capital gain. This can be a big plus.

Nature of business asset rollover relief

Business asset rollover relief enables any capital gains tax arising on the disposal of an eligible asset to be deferred where another asset is acquired from the proceeds of the sale of the old asset. The capital gain is ‘rolled over’ and does not become chargeable until the new asset is sold.

Where the cost of the new asset is at least equal to the full amount received from the sale of the old asset, relief is available in full. Effect is given to the relief by reducing the base cost of the new asset by the amount of the rolled-over gain.

If the new asset costs less than the amount received from the sale of the old asset partial relief may be available.

The new asset must be acquired in the period that runs from 12 months before to three years after the date of the disposal of the old asset.

Example

Abigail has a number of properties that she lets as furnished holiday lettings.

She sells a holiday cottage which she acquired for £140,000 for £270,000, realising a gain of £130,000. She reinvests the proceeds in a new holiday cottage, which costs £320,000 and claims business asset rollover relief.

As a result, she defers paying capital gains tax on the gain of £130,000. Instead, the base cost of the new property is reduced by £130,000, from £320,000 to £190,000.

Had Abigail not claimed the relief, assuming that she is a higher rate taxpayer, she would have had to pay capital gains tax of £36,400 within 30 days of completion of the sale of the cottage. Instead, she has this money available to reinvest in the new property.

At UK Landlord Tax, we understand property tax for landlords with Air BnB Furnished Holiday Lettings

Not only can we handle your annual tax return, we can also help you with tax planning and making sure that you are set up correctly to help you protect your property wealth. All of this for a fixed fee, depending on your circumstances.

Get in touch on 0800 907 8633, via tax@fixedfeetr.com or online.

Related blog posts

Residence nil rate band frozen

Residence nil rate band frozen

With the residence nil rate band being frozen until 2026, if you have a high-value estate in the family it might be worth planning ahead to make sure you reduce the inheritance tax bill. Our latest blog explains more. The residence nil rate band (RNRB) is an...

read more
SDLT and shared ownership

SDLT and shared ownership

Shared ownership can enable an individual to own a stake in a property where they would not otherwise be able to get on the housing ladder. As with other property purchases, stamp duty land tax (SDLT) is payable where you buy a property through shared ownership in...

read more

Got a question for our landlord tax experts?

If there’s a property tax issue that has you puzzled or worried, get in touch. Everyone on our team loves to talk, especially when it helps people like you find peace of mind.