Holiday let owners could be losing thousands says tax expert
The tax rules for furnished holiday lets have changed and chartered accountant Robert Stone from Ilminster is concerned that too many North Somerset holiday let owners are potentially missing out on tax savings worth thousands of pounds.
“HMRC has made some important changes to the furnishing holiday lettings (FHL) tax rules, which holiday let owners in the UK or the EEA (European Economic Area) need to be aware of,” said Robert Stone, “plus there are two major expenses, interest on property loans and capital allowances, which are constantly overlooked by holiday home owners.”
“The tax office has updated its system for losses made by FHL’s. Previously someone could use a holiday let loss to reduce their other taxable income, now you can only offset it against future letting profits of that holiday home.
“Plus, HMRC differentiates between UK holiday homes and EEA holiday homes, so you can only use the losses of a UK holiday home against the future profits of that UK holiday let. The same applies to EEA holiday homes. You cannot use a holiday let loss to reduce your other taxable income.”
Interest on property loans is on the list of allowable expenses for FLHs and yet Robert finds that many people believe that if the loan used to buy their holiday home is secured on their own house, then they cannot claim the interest as an expense against the letting income.
“If the loan is used to fund the purchase of the holiday home, then interest can be claimed – it actually doesn’t matter what property is used as security.”
Because there are many holiday let businesses who struggle to meet the eligibility criteria year on year, from April 2012 HMRC will be introducing a period of grace.
This will enable businesses, such as those whose letting income is reliant on the summer months and who are forced to do six month winter lets, to continue to qualify, giving them time to get on their feet.
For more detailed information about tax claims for furnished holiday lets, please contact Robert Stone, Robert Stone & Co on 01460 55661 or email email@example.com or visit: www.robert-stone.co.uk