Holiday homeowners to get a significant tax break
Could you be eligible for a rebate?

People that have bought overseas holiday homes through companies could be about to enjoy lower income tax charges following changes announced in Budget 2007.

Gordon Brown removed the “benefit in kind” tax charge that has been payable on overseas properties purchased through companies – effectively an income tax charge on the property’s assumed annual rental income.

So a higher rate taxpayer, who purchased an overseas property worth £500,000 with a notional rental yield of 8 per cent, would have been liable to pay income tax of £16,000 each year.

The removal of this charge will be retrospective, so anyone who has been dutifully paying the tax in previous years can now claim a refund from HM Revenue & Customs.

Market research groups estimate that 2-3 per cent of British households own at least one property abroad.

People buying homes in countries such as Spain, France and Portugal have frequently set up companies through which they process their purchases, as this has triggered substantial tax advantages.

For example, properties owned by companies would often escape capital gains tax and stamp duty and benefit from lower tax rates on rental income. Also, punitive wealth taxes charged by many European countries typically do not apply to corporate structures.

The removal of the charge applies to companies whose sole activity is holding the property for personal occupation and/or letting. The property has to be the company’s only or main asset.

This article is for your general information and use only and is not intended to address your particular requirements. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without appropriate professional advice after a thorough examination of their particular situation. Budget 2007 information included in this article is subject to the Finance Bill becoming law. Your home may be repossessed if you do not keep up repayments on your mortgage.

Article date: 03.07