Owners of furnished holiday lets need to get their skates on

Owners of furnished holiday lets need to get their skates on



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It's been fairly well documented of late that the majority of owners of commercial property are sitting on sizeable unclaimed capital allowances amounting to tens or even hundreds of thousands of pounds — and that brokers can make a fair bit of income by introducing them to companies that specialize in this field, including ourselves....

By Dave Collier of CA Tax Solutions,
 
At a time when margins are being squeezed whatever business you're in, the prospect of money for nothing in the form of a significant tax rebate is certainly proving attractive to commercial property owners. But many people are not aware of all the types of commercial property that can be claimed on.
 
One category that is often overlooked when people think unclaimed tax allowances is the furnished holiday let (FHL). This may be because it's not as sizeable an asset as other commercial properties or that it just doesn't make it onto the radar because it's based abroad, as many are.
 
But it's the FHL that should be the priority right now for securing rebates given imminent changes to the tax regime.
 
As of 31 January 2012, owners of FHLs (located not just in the UK but also the European Economic Area) will no longer be able to offset losses made by their FHL against their total income but will have to offset them against profits from the same FHL business.
 
Given that very few FHLs actually make a profit, 31 January effectively therefore signals the end of a very valuable tax allowance. 
  
If you want to get technical, the new rules are already in place but 31 January 2012 is when the two year period of grace for owners of FHLs seeking the maximum tax allowance ends. 
 
So basically, if one of your clients owns an FHL and qualifies under the old rules then they should be taking a detailed look at their capital allowances now to generate as big a historical tax rebate as possible before the end of January that can then be set against their total income.
 
And because it can take a few months to get this all done, it's best to act soon.
 
In recent months, we have achieved a number of significant rebates for owners of FHLs. One client, introduced to us through an intermediary, had an FHL in Portugal that he had purchased in 2007 for £448,000 and spent more than £30,000 improving.
 
We very quickly identified allowances of £171,623. As a higher rate taxpayer, the gross benefit to the client was £68,649. After our fee of £15,132 (inclusive of VAT and the survey costs), the client was better off to the tune of £53,000 — while the broker who introduced him made just over £3,000.
 
Another client introduced to us had an FHL in Mallorca, which he had purchased in 2000 for £300,000. Taking into account his post-purchase improvements of around £60,000, we identified capital allowances of £78,161. Again, the client was a higher rate taxpayer so the gross benefit was £31,264. The fee payable to the introducer was £1367.81.
 
The moral of this tale? Don’t let the furnished holiday let slip through the net — and not just for your clients but for yourselves, too!
 
For more information visit www.cataxsolutions.com or call 0300 303 1903.
 

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