17
Aug
Holiday Lets - Second Home owners to lose tax break...
· From the Telegraph: The tax advantages on furnished
holiday lets were reinstated by the Coalition after the previous
Government abolished them in April....
· George Osborne reversed the measure in the June Budget
saying he wanted to help small businesses operating in the tourism
industry. However, the Treasury has now said it intends to make it
much tougher for home owners to qualify for the breaks.The move
comes as the Government prioritises reducing the country’s
deficit.
· Under the proposals, home owners will need to secure more
bookings and will no longer be able to offset their mortgage costs
against their personal income. This tax break is one of the main
financial reasons for investing in a furnished holiday let as it
helps to reduce an individual’s overall tax
liabilities.
· The new proposals aims to bring the rules in line with EU
law and make them focused on commercial businesses rather than
those run for personal use.It means more than a quarter of the
65,000 home owners offering holiday lets in Britain will no longer
be eligible for the tax benefits from 2011-2012, according to a
consultation document published by the Treasury.
· The consultation said the changes to the rules needed to be
“affordable”.
· Mike Warburton, of accountants Grant Thornton, said:
“The coalition has recognised the importance of this relief
to the holiday industry, but clearly want to restrict a loss to the
Exchequer in extending the relief to homes throughout the EU as the
law requires.”
· The taxman requires certain conditions to be met before the
furnished holiday lettings rules can be applied.
· The Treasury is now proposing that the property must be
available to let for a total of 210 days in a 12 month period, up
from the current level of 140 days.And it is suggested that the
property must be actually let for at least 105 days during that
year, up from just 70 days.
· The Treasury also wants to restrict losses from furnished
holiday lets so that they can only be set against future profits
from that same business. It means losses, such as mortgage interest
and any repairs, cannot be offset against other investment incomes,
such as from shares or savings.
· Accountants warned that some home owners may be forced to
sell up to reduce their debts and it could deter those who were
thinking about getting a holiday let in the future.
· Leonie Kerswill, a tax partner at accountants
PricewaterhouseCoopers, said: “Home owners who regularly use
their property for family trips, and who do not generally leave
much time for other members of the public to use will have to
rethink, and ensure that they let their homes for three and a half
months each year if they want to be eligible for a 10 per cent
Capital Gains Tax rate on an eventual sale.”
· There are also other tax breaks that apply to furnished
holiday lets, such as capital gains tax rollover relief, which is
expected to continue.