But with just under two weeks to go, they need to act fast, says PKF Accountants & business advisers.
Matt Coward, Director of Private Client Tax Services at PKF said, “Every owner’s situation will be different, but there are at least ten different scenarios in which reclassifying the letting of an overseas holiday home as a furnished holiday letting trade will save you tax.”
“It is quite hard to meet the tests for lettings to qualify as furnished holiday lettings each year1 but it is certainly worth checking. This is particularly important if you have made losses on the letting - the loss can now be claimed against your other UK income and earn you a tax refund. But you must act quickly: any losses for the 2006/07 tax year must be claimed by 31 July or you will miss out.”
There are a wide range of tax advantages to achieving ‘trading’ status for a FHL and, at the time of the 2009 Budget, HM Revenue & Customs (HMRC) recognised that these should be available on lettings across the EEA to avoid charges of tax discrimination under EU rules. However, tax breaks cost the Government money and it has announced that tax breaks for all FHLs will disappear from the 2010/11 tax year.
Matt said “Those with overseas holiday homes have had a tough time in the last year: falling property values across Europe, currency movements and a fall in Brits taking overseas holidays could all have hit them in the pocket. Owners of let properties have by far the highest casualty rate when it comes to repossessions. So check if you can make tax claims now.
“Obviously, claiming any losses for 2006/07 is the first priority: the 31 July deadline is not likely to be extended. However, it is going to take some time for individuals to sort out all the other issues. The complexity of the position is not helped by the fact that the guidance in HMRC’s Technical Note of 22 April 2009 does not take account of the impending change in the normal deadlines for claiming tax reliefs.”
From 1 April 2010, in general, deadlines that are currently five years and ten months after the end of the relevant tax year will shorten to 4 years after the end of the tax year. Deadlines for companies will shrink from 6 years after the end of the accounting period to 4 years after.
Matt added, “This is a rare opportunity to get some tax back. So, regardless of what the absolute deadline for later years turns out to be, it is sensible for individuals with overseas holiday homes to get everything up to date by 31 March next year.”
