Your firm has been asked to advise two unrelated clients, Monisha and Horner. The advice relates to furnished holiday accommodation, tax planning for a married couple, and the personal service company (IR 35) rules.

(a) Monisha:
– Is married to Asmat.
– Earns a salary of £80,000 per year and realises chargeable gains of £6,000 per year.
– Owns a UK investment property, which is let to short-term tenants.

Asmat:
– Looks after the couple’s children and has no income or chargeable gains.
– Expects to return to work on 6 April 2019 on an annual salary of £18,000.

The UK investment property owned by Monisha:
– The property cost £270,000 and is currently worth £300,000.
– The letting does not qualify as a commercial letting of furnished holiday accommodation.
– Annual income and expenditure

– Monisha claims the wear and tear allowance in respect of this property.
– The property will be sold on 5 April 2020 and is expected to create a chargeable gain of £100,000.

Proposals to reduce the couple’s total tax liability:
– Monisha will give a 20% interest in the investment property to Asmat on 1 April 2014.
– The couple will ensure that, from 6 April 2014, the letting of the investment property will qualify as a commercial letting of furnished holiday accommodation.
– From the tax year 2014/15 onwards, Monisha will claim annual capital allowances equal to the current annual wear and tear allowance.

Required:
(i) State the conditions which must be satisfied in order for the letting of a UK furnished property to qualify as a commercial letting of furnished holiday accommodation. (3 marks)