Last chance for holiday homes tax break - Hunts accountants
TIME is running out for holiday home owners to take advantage of a tax break on their properties, according to George Hay chartered accountants of Huntingdon. For many years, HM Revenue and Customs has treated the renting out of holiday homes as a busines
TIME is running out for holiday home owners to take advantage of a tax break on their properties, according to George Hay chartered accountants of Huntingdon.
For many years, HM Revenue and Customs has treated the renting out of holiday homes as a business rather than an investment, meaning the owner can offset any losses made in the course of renting out the property against the owner's other income.
It was announced in this year's Budget that the tax break will be withdrawn from April 2010.
Until that date, claims can still be made for UK properties, as well as - for the first time - holiday homes within the European Economic Area, providing a one-off opportunity to utilise any losses and save UK income tax.
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To qualify for this special tax treatment, a property must meet certain criteria. It must be available to rent for at least 140 days each tax year, and let as holiday accommodation for at least 70 days during the tax year. A letting exceeding 31 days to the same person is not treated as a holiday let. When the property is not let for holidays, it must not be rented out for any other reason for more than 155 days per year.
Barry Jefferd, tax partner at George Hay, said: "Holiday home owners whose letting income currently makes a loss or breaks even may want to take advantage of the last year of this tax break by carrying out any outstanding maintenance jobs to maximise tax relief.
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"However, it is important to distinguish between repairs and improvements, as the latter count as capital expenditure and are not deductible for income tax - although they can still be counted against Capital Gains Tax if the property is sold.