UK tax relief on holiday homes: beat the HMRC deadline
MANY British owners of overseas holiday homes may be forgetting that they could be owed thousands of pounds from their offshore properties but this tax relief may become more difficult to qualify for by 5 April 2012, writes Guillaume Barlet.
Following the 2009 budget, the generous rules that benefited owners of UK Furnished Holiday Lets (FHL) were extended to properties within the European Economic Area (EEA).
To qualify for the tax treatment provided, the HMRC has indicated that certain conditions must be met in order to qualify for the tax treatment provided:
- The property must be situated in the EEA
- The business must be carried on commercially, and with a view to a profit
- The property must be available for commercial letting as holiday accommodation to the public for at least 140 days during the relevant 12 month period
- The property must be commercially let as holiday accommodation to members of the public for at least 70 days during the relevant 12 month period
- If the property is let to the same person for a continuous period of more than 31 days it will not qualify for FHL. Any such periods of longer term occupation cannot total more than 155 days during the relevant period
Changes that took place on 6 April 2011 mean that landlords are running out of time to take advantage of the current rules.
As a result, for expenditure incurred prior to 6 April 2011 allowances can be offset against taxpayer’s total income and are not limited to income from the rental business.
After 6 April 2011, relief can only be used against the income from the FHL business itself.
In addition, HMRC has proposed a general tightening up of the qualifying rules expected to take place from April 2012. In effect, the changes provide that the property must be available to let for 210 days, and actually let for 105 days of the year.
The good news for property owners is that claims can be backdated into any 'open' tax year meaning that this tax year is really the last chance to take advantage of the FHL rules.
So how much could be saved?
It is estimated that for a property purchased for £200,000, as much as £50,000 of tax relief could be identified*.
In any case, it is important to remember that specialist advice can help determine if you are likely to benefit from a tax relief.
(* Figures are based on the average claim value for presentation purposes only and are not contractual)
Guillaume Barlet is a French lawyer specialising in French assets and wealth management issues for Bank House Investment Management Limited. Guillaume can be contacted by e-mail or by telephone on 01242 545 971.