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Will there be FHL and entrepreneurs' relief?

Question
A property is owned for, say, 15 years and has been let out on a shorthold assured tenancy. The owner then starts to rent out property on a furnished holiday letting (FHL) for a year and then sells the property. This will then attract 10% capital gains tax (CGT) (entrepreneurs' relief).  Please can you clarify (a) will the 10% CGT be payable on the total amount of gain i.e. the gain over fifteen years, or will it be apportioned between the FHL and the assured period referred to in the example 14 years of shorthold assured tenancy and the 1 year of FHL? (14/15 of the gain at the tax payer’s band and 1/15 of the gain at 10%); (b) If there are any CGT losses brought forward can they offset against the 10% CGT? (c) Can the annual CGT exempt allowance be offset against the gain?

Arthur Weller replies:
a) If you look at www.hmrc.gov.uk/manuals/cgmanual/CG73503.htm and www.hmrc.gov.uk/manuals/cgmanual/CG73506.htm you can see that only the last year when the property was let out as FHL will be eligible for the 10% CGT rate, but not the first 14 years. b) c) If you look at www.hmrc.gov.uk/manuals/cgmanual/CG64125.htm you can see that brought forward CGT losses and the CGT annual exemption can be offset against the gain assessable at 10%.

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