My wife and I were both, previously, higher rate taxpayers and we split profits or losses 50:50 for tax purposes via self-assessment. Although I am now not working and earning, I am in the zero tax bracket for 2013/14 and am now using my available time in managing the furnished holiday lettings (FHL) property. Can the zero tax rated individual take all the profits against their zero rate band (would be less than £5,000 in total profit) and do both parties need to agree to this? Assuming this is allowable, would HMRC need to be informed, and if so does timing matter? I have heard that couples in this scenario can choose each year how they want FHL profit/losses treated. Have HMRC challenged that? 

There is a 50:50 rule and a Form 17 rule that applies to married couples' income from property - see www.hmrc.gov.uk/manuals/tsemmanual/TSEM9800.htm. However if you look at this page www.hmrc.gov.uk/manuals/tsemmanual/TSEM9820.htm you can see that these rules do not apply to income from qualifying furnished holiday lettings, as you have stated. It says there that if a spouse carries on the activity alone, that spouse is taxable on the income.