Are you eligible for a tax rebate?

5 May 2009

Thousands of Brits letting out their homes abroad may find that their property qualifies for the same tax breaks as dwellings in the UK, as long as strict conditions are met.

These landlords are permitted to submit amended tax returns to adjust their tax returns, as long as they are put forward before April 2010, when the tax breaks end.

However, this change in taxation is only applicable where either of two circumstances has arisen:

1. Where owners have incurred losses from the letting of the property since 6 April 2003

2. Where a property used for holiday lets has been sold at a profit since 6 April 2003

Conti Finance, who are offering consumers a free tax review, gives the following examples of how the rebates work in practice:

Example 1
Mr Smith owns a Spanish villa that, apart from a couple of weeks’ private use, is let commercially throughout the year. Whilst Mr Smith tries to let the property all year round, the seasonal nature of the business means that, year on year, a loss of around £5,000 is incurred. Mr Smith may now be able to make a claim to offset this loss against UK income tax over the last five years. As a higher rate taxpayer, this would generate a tax repayment of around £10,000 (5 years x £5,000 x 40%).

Example 2
Mrs Jones acquired a holiday property in Portugal in 2001 for the equivalent of £100,000. The property was let out for five years, on a holiday-let basis, and sold in 2006 for £200,000. She paid capital gains tax in the UK of £30,000 on the sale, after all available tax reliefs. It may now be possible to go back and amend the calculation to include further reliefs, which would reduce the taxable gain to around £2,000. This would save Mrs Jones £28,000.

Michael Axelrod, Conti’s commercial director, says: “We see it as part of our service to help overseas property owners save money, and anyone who thinks they could be eligible for these tax breaks should act quickly. This is an opportunity limited to the current tax year, and it would be a great shame to miss out on a valuable windfall.”

See Also:   Conti, Tax