Reprieve for holiday homes
by

Tom Scott Lockhart

ONE positive piece of fallout from the current pre-election frenzy has been a reprieve for holiday home owners.

New rules were due to be introduced on 6 April which would have meant holiday home owners would no longer be able to take advantage of tax breaks such as off-setting losses against other income and claim tax relief on mortgage interest. The change in the rules was, apparently, to bring the UK into line with the rest of the European Union.

However, as part of the "wash-up" which takes place at the end of any Parliament the political parties indulge in a little "horse-trading" to decide which bills should be passed into law before Parliament is dissolved.

Among the beneficiaries this time are holiday home owners and cider producers (there was a proposal to add an extra 10p tax on cider). Another proposal which was dropped was the "broadband" levy, due to be introduced on every landline to pay for high-speed broadband throughout the country.

The current tax regulations allow owners of furnished holiday lets to offset utilily bills, council tax, running repairs and mortgage interest against income.

To qualify the accommodation must be available to rent for at least 170 days a year and tenanted for at least 70. Lets of longer than a month do not qualify.

If the lettings business makes a loss it can be offset against other income, such as a salary from a job, and "rollover" rules allow capital gains liability to be deferred.

What will happen after the Election nobody knows. If Labour is returned to power they could bring in the legislation retrospectively. Alternatively a Conservative government has indicated it would keep the tax break, although it may change some of the qualifications.

A third possibility is that the legislation would be re-introduced by not implemented for a couple of years, giving owners the chance to bring forward any tax-deductible work.

If the new system is introduced holiday home owners could turn their property into full-time rentals, a B & B, or a hotel, all of which count as businesses for tax purposes.