ExpertMedium2 marksMultiple Choice
ACCA · Question 02 · Income tax liabilities
Section A
Marcus owns a coastal cottage that qualifies as a Furnished Holiday Letting (FHL). During the current tax year, the property was available for letting for 250 days and actually let to the public for 90 days. Due to unforeseen travel restrictions, he could not meet the actual letting condition. He has another FHL property that was let for 150 days. Which of the following elections can Marcus make to preserve the FHL status of the coastal cottage?
Section A
Marcus owns a coastal cottage that qualifies as a Furnished Holiday Letting (FHL). During the current tax year, the property was available for letting for 250 days and actually let to the public for 90 days. Due to unforeseen travel restrictions, he could not meet the actual letting condition. He has another FHL property that was let for 150 days. Which of the following elections can Marcus make to preserve the FHL status of the coastal cottage?
Answer options:
A.
A period of grace election only.
B.
An averaging election.
C.
A joint property election.
D.
No election is possible; the property loses FHL status.
How to approach this question
Evaluate the FHL conditions (available 210 days, let 105 days). Since one is let 90 days and the other 150 days, check if averaging helps.
Full Answer
B.An averaging election.✓ Correct
To qualify as an FHL, a property must be let for at least 105 days. The coastal cottage was only let for 90 days. However, because Marcus has another FHL let for 150 days, he can make an averaging election. The average is (90 + 150) / 2 = 120 days, which satisfies the 105-day condition for both properties.
Common mistakes
Assuming a period of grace election is the only option when the actual letting condition is failed.
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