Shock as holiday home owners hit by tax
Friday, April 24th, 2009From next April, small business owners of holiday homes will not be able to use their properties to offset losses made on their investment or defer capital gains tax payments.
Hidden in the small print of the Budget, and not actually mentioned in the Chancellor’s speech, the decision has outraged second home owners across the UK.
Ross Elder, managing director of holidaylettings.co.uk, said that the existing rules on offsetting losses on holiday properties These rules have served to encourage greater use of holiday properties, rather than sit empty, and in turn boosted UK tourism and supported local economies. For the home to qualify as a ‘holiday property’, it needs to be fully furnished, and run as a commercial business. It must also be let for at least 70 days in a year and available to the public to rent for a total of 140 days of the year.
The rule meant that for those people facing hefty capital gains tax bills, investing in holiday homes was a popular option. There is now every likelihood that the extra tax bill on property owners will have the effect of severely raising prices for UK holidaymakers next year.
Toby Ryland, senior tax partner at Blick Rothenberg, agrees: “It’s going to make letting a second home as a holiday let less attractive. It will restrict availability and potentially push up the cost of renting a holiday home.”
At least the change in tax legislation won’t be retrospective, so the capital gains tax will not need to be paid by existing owners of holiday properties until they sell it.
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