South’s Holiday Homes Lettings Operators have a window of opportunity for tax relief

Technical note in Budget affects South’s tourism

South’s holiday home letting operators have an opportunity to benefit financially, as a little known technical note in the recent Budget has revealed the Government has been forced to extend the furnished holiday lettings tax relief - but only until 2010.

The summer of 2009 is expected to be a boom time for UK holidays due to the strength of the Euro and the effect of the credit crunch.

As a result of a case which went to the European Court, all holiday homes within the European economic area will qualify for tax relief. The benefits of this relief could include favourable Capital Gains Tax treatment upon sale of properties, the possibility of Business Property relief for Inheritance Tax, and income derived from furnished holiday homes lettings classed as ‘pensionable earnings’.

Furnished Holiday lettings operators also have the ability to use Capital Gains tax rollover relief when they sell and reacquire a new qualifying asset.

Andrew Lines, Tax Partner at BDO Stoy Hayward in Southampton, commented: “The Government is not at all keen on the idea of UK taxpayers claiming the favoured Furnished Holiday lettings status on properties overseas. Their response to the European Court ruling has been that the Furnished Holiday lettings rules will be repealed from 6 April 2010.

“From that date Furnished Holiday lettings will be treated in the same way as any other rental received from investment property and put Furnished Holiday lettings operators in a much less favourable tax position.

Holiday Homes Letting Operators do have alternative options available to them after April 2010. Andrew Lines explained: “It is worth noting that guest homes and hotels are generally treated as trades, so holiday lettings operators may wish to consider offering other services in order to maintain their trading status.”

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For more information, please contact Debbie Osborne at Logical Creative Marketing or email debbie@lcm.co.uk