Few property owners are aware of this generous treatment. It is important to act quickly while it remains.
If you have bought a furnished residential property anywhere in the European Economic Area, in the last ten years 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 following key conditions.
Tax need not be taxing!
Suppose you bought a property in Spain for 500,000 euro. Potentially this could provide a tax saving of up to 75,000 euro. At present this tax saving can be set off against both the rental income from this property and against any other personal income. It does not matter when the property was purchased provided you still own it now. For a property of 1m euro the saving could be 150,000 euro.
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 percent success record in reaching agreement for tax payers. Experience indicates less than one percent 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. Most accountants are unable to assist. It requires a capital allowances specialist to value the proportion eligible. When you bought the property generally no split is available of the price. Your accountant only knows how much you paid for the property. 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 percent of the price paid for the property may qualify for tax savings.
What should you do now?
There is a short window to benefit from this tax break from now through to 30 January 2012. This is because the UK Government are introducing new laws which are more restrictive. Consequently for your tax returns for April 2010/2011 these will need to be sent to HMRC before 31 January 2012.
After this date tax savings are still available but will be more limited. So make the most of the tax breaks while the sun still shines.
John Lovell is a director of capital allowances specialists Lovell Consulting. For more information visit: www.lovellconsulting.com
