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For tax purposes, there are significant benefits of owning an investment property which qualifies as a “Furnished Holiday Let” (FHL). We would always recommend you seek individually tailored advice from a qualified Tax Advisor. The earlier you receive this advice, the greater the likely benefit. Home Counties can recommend Tony Briscoe, a personal tax specialist with DHC Accounting Limited, who has particular expertise in tax planning surrounding property investment and more than 20 years experience of acting for furnished holiday cottage owners. You can contact Tony at DHC Accounting on 01900 64464 or by email at advice@dhcaccounting.co.uk or via www.dhcaccounting.co.uk DHC Accounting are able to advise on all aspects of taxation and indeed profit planning to enable you to get the most out of your holiday letting business. The information set out below is a general guide and you should always seek expert advice on all tax matters. The Tax Benefits Assuming certain qualifying conditions are met, property let on a commercial basis as furnished holiday letting accommodation in the UK qualifies to be treated as a business for all taxes. The benefits of this are broadly as follows:- Income Tax All expenditure incurred in the course of the business is deductible from the income. This can include expenditure (including interest paid) in the period before the business commenced and also Capital Allowances on capital expenditure (such as furnishings and appliances, fitted kitchens, bathrooms and central heating systems and even swimming pools). Where losses are incurred, these can be offset against other taxed earnings to obtain tax reductions or refunds. These are significant benefits that are not available to other types of letting (e.g. long lets). Capital Gains Tax The property itself will be treated as a business asset for Capital Gains Tax purposes. HMRC recently announced in their pre budget report that they are withdrawing certain reliefs previously available on disposals of business assets which will take away some advantages enjoyed over disposals of non business property. However a very important relief will (for now at least) remain and that is the ability to re-invest the sale proceeds of qualifying business assets in suitably qualifying replacement business assets which means that any capital gains tax that might have been payable can be deferred (indefinitely if the asset is still being used for business purposes on death). It will also still be possible to mitigate Capital Gains Tax by sensible
use of Principal Private Residence elections. Inheritance Tax So long as the property has been owned for 2 years and is genuinely set up on a commercial basis, then it should qualify for 100% business property relief and thus be excluded from one’s taxable estate on death. This is a particularly sensitive area and expert advice must be sought in connection with contentious cases. Value Added Tax If the value of the gross income exceeds the VAT registration threshold (currently £64,000) then the business would be required to register for VAT. This is not usually a benefit but is generally not relevant anyway for most owners that are trading below the registration threshold. Anyone who is commencing a major refurbishment or construction could however benefit significantly as a result of being able to register for VAT from the outset thereby recovering a large amount of VAT on the refurbishment and setting up costs. DHC Accounting offer a fixed fee accounting service and for a further information pack please contact Tony or Matthew Trevorrow for more details by email (advice@dhcaccounting.co.uk) or telephone 01900 64464 or by contacting them at DHC Accounting Limited, Unit 7, Lillyhall Business Centre, Jubilee Road, Workington. Cumbria, CA14 4HA.
The levels and bases of and relief’s
from taxation are subject to change and their value depends upon on the
individual circumstances of the investor |
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email:homecounties@btinternet.com Home Counties Mortgage Services is authorised and regulated by the Financial Services Authority. We are entered on the FSA register No 434190 at www.fsa.gov.uk/register The Financial Services Authority does not regulate some aspects of Holiday Let Mortgages Registered in England under Company number 5050127. The guidance contained in this website is subject to the UK regulatory regime and is therefore primarily targeted at customers in the UK. |
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