Holiday home owners who let out their property overseas could miss out on tax allowances worth thousands, if they do not make their claim before the end of the tax year, according to John Davies, managing director of Hedge Tax Mitigation, niche property tax specialists.
This little known tax legislation permits homeowners of furnished holiday lets, which meet criteria laid down by the Inland Revenue, to offset “Capital Allowances” against their total income from salary and dividends paid in the UK, as well as rental income.
But unless the claim is made before 5th April 2011, the window of opportunity may be shut forever as the Government is thought to be planning to end the ability to offset these tax allowances against income earned in the UK - called 'sideways relief'.
Davies estimates that over 97 per cent of holiday home owners are unaware of these tax allowances, due to the specialist nature of this area of property taxation, and that millions of pounds remain unclaimed.
The tax benefit could make all the difference to the many owners struggling to keep their homes due to the weak pound and lower occupancy rates.
“It is possible that between 20 and 30 per cent of the purchase price of a property could be claimed as Capital Allowances, which on a property bought for £250,000, could mean a tax saving of £15,000 to £37,500. These are large sums and the owner has an entitlement to claim them,” explains Davies.
He adds: “In these austere times as the government looks to raise revenue, holiday homes, as well as buy-to-let portfolios are coming under the government spotlight. Irrespective of when they bought their property, owners need to stake their claim now before the legislation changes, or this money, which is rightfully theirs, will be lost forever.”
The legislation allows owners to claim tax allowances against items such as electrical cabling, kitchen fixtures and fittings, plumbing, air conditioning, and many other items integrated into the fabric of the building, which will not have been claimed for by their accountant.
It is estimated that over two million British tax payers own holiday homes in the UK and overseas, with the estimated value of British owned properties in the eurozone currently considered to be around £47.5 billion.