INDEPENDENT CAPITAL ALLOWANCES SPECIALISTS

DREAM TAX BREAKS

Your holiday home in Europe may qualify for substantial tax repayments.

Leading real estate tax specialists Lovell Consulting explains.

Few property owners are aware of this generous treatment for new and second hand residential properties.
If you have bought a furnished residential property anywhere in the European Economic Area in the last ten years or more, you may benefit.
It applies where let on a commercial basis. It also includes furnished holiday lets in UK. Personal use is fine subject to the conditions in the checklist.


TAX NEED NOT BE TAXING!


Suppose you bought a property in Spain for €500,000. Potentially this could provide a tax saving of up to €75,000. This tax saving can be set off against the income from the same furnished holiday letting business.
It does not matter when the property was purchased provided you still own now. For a property of €1m the saving could be €150,000.


TAKE A TAX HOLIDAY


The tax savings are available based on current UK law. This is not a scheme and Lovell Consulting has a 100% success record in reaching agreement for tax payers. Experience indicates less than 1% of owners have benefited.
UK tax legislation provides a tax break for expenditure on furnished holiday lets for the proportion of the property price for heating, ventilation, swimming pools, sanitary ware, kitchen fittings and electrical installations.

FEW ADVISORS KNOW HOW


Until recently few tax advisors have been aware of this concession applying in Europe. It requires a capital allowances specialist to value the proportion eligible. When you bought the property generally no split is available of the price. Unfortunately no tax relief is available for the land or the bricks and mortar. It is therefore necessary for a specialist to segregate the price paid into the parts which do qualify. A fully disclosed analysis can then be included in your tax return. Typically up to 35% of the price paid for the property may qualify for tax savings.

WORKED EXAMPLE 

For a property purchased for £500,000 by a higher rate tax payer there could be total capital allowances of circa £150,000. This will provide total tax savings over time, at a 45% tax rate of £67,500. If the annual investment allowance has not already been claimed then this could be offset in all one year with any excess carried forwards. 

Alternatively, if the annual investment allowance is not applicable then in the first year allowances will be available of circa £20,000. In this case if there is taxable rental income of £40,000 this will be reduced to £20,000 and the tax bill would be halved. The allowances will reduce slightly each year on a declining balance basis until tax relief has been provided on the full £150,000 of allowances. 

CHECKLIST

  • Contains basic furniture
  • Let commercially for more than 105 days a year
  • Available for commercial letting 210 days a year
  • Not let to same entity for more than 31 days
  • Owned personally or in a limited company
  • Tax is paid by you in the UK on this letting income

WHAT SHOULD YOU DO NOW?

If you own a property and have been paying tax on this rental income, you should make a claim now. It may also be
possible to make a claim in an earlier tax
return.


Make the most of the tax breaks while the sun still shines. The simple checklist above will confirm whether
your furnished holiday letting qualifies for this valuable tax relief.

CONTACTS

John Lovell is a director of capital allowances specialists Lovell Consulting.
T: 020 7329 1300

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