Glamping and Air BnB

If you are a farmer or landowner and are planning to diversify into furnished holiday accommodation, possibly renting “pods” as holiday accommodation read this blog to accompany your tax planning.  

What services do you supply?

The Pod is usually a simple hut, possibly a shipping container or a converted horse box. What makes Pods a desired location to take in some nature, is that despite their remote locations, they are secure, sturdy, have heating, lighting, furnishings, and possibly electricity. Some have hot tubs and log burners. Gardens can be included with a separate office for remote worker and business use.

Mobile holiday accommodation income taxes

All income derived from letting the pod is accounted for as property income unless, for example, when a cooked meal is provided, this then becomes a trade. To qualify as ‘furnished holiday accommodation’ (FHA) the Pod needs to be available for at least 210 days per year and actually be let for at least 105 days.

Trade or property business

Trade involves the transfer of goods and services from one person or entity to another, often in exchange for money.  One of the important factors when calculating any taxes depends on the services being offered with the holiday accommodation. Its important to identify this factor from the outset as this will impact Inheritance Tax (IHT) and Capital Allowances.

Property businesses are where the tax liability on profits from UK land or property arise from an investment business. 

Once we answer these questions, we will be able to establish how the taxes are calculated and look what tax reliefs may be possible, and Super Deduction if held in a limited company.

Super Deduction is new legislation introduced on 6^th April 2021 for two years. On qualifying expenditure, a super deduction allowance can be claimed for 130 percent of the purchase price.  

Purchasing moveable accommodation

Building and installation costs of the furnished holiday accommodation are classed as capital expenditure.

The exception for this exclusion, in S23 of Capital Allowances Manual is for caravans provided mainly for holiday lettings, the difference in HAF, interpreted narrowly by HMRC, will be applicable to farm or landowner’s diversification if it is moveable.

“Glamping”

As these new lifestyle businesses are formed around the UK and the world, taxes here in the UK will be under scrutiny with this relatively new type of trade or business.

Glamping structures are a usually camping with some of the luxuries of home, however Pod camping could be not too dissimilar to a static caravan which leaves some scope for uncertainty. It is therefore essential to be completely certain when applying the Super Deduction tax relief during the next two tax years.

Where this glamping trade is held in a Limited Company

These Pods would qualify for super-deduction as lodges in a holiday operation will qualify as plant and machinery if they meet the conditions described in the following paragraphs.

A caravan can also qualify providing it is moved regularly as part of normal trade usage and does not occupy a fixed site and is not leased to a fixed tenant on a residential basis. As an example, the caravan could move from a winter to a summer location on a permanent basis to reflect changes in weather conditions.

If the caravan fails to meet the above conditions this would qualify for Annual Investment Allowance at 100%.   

HMRC has recently published an update to include leased assets in the Super Deduction calculation.