Holiday home owners will lose capital gains benefit as tax break is withdrawn.
The owners of holiday homes will no longer be able to use the properties to defer capital gains tax payments or offset losses made on their investment against their income.
The change, which will come into force in April next year, was buried in a technical note published on HM Revenue & Customs website alongside Wednesday's Budget.
Tax experts warned it would make it less attractive for people to let out a second home as a holiday property.
Toby Ryland, tax partner at Blick Rothenberg, said: "It's certainly going to make letting a second home as a holiday let less attractive. It will restrict availability and potentially push up the cost of renting a holiday home." Patrick Stevens, tax partner at Ernst & Young, said: "It means that people who have been encouraged to buy second properties because of capital gains will see that benefit disappear." He said the move was likely to lead to a "modest" reduction in the number of prospective buyers of these properties.
Under the current rules, people facing a capital gains tax bill after selling other assets can defer paying the money if they buy a holiday property, until after they sell it.
This rule made investing in holiday homes popular with people who faced significant capital gains tax bills.
Second home owners could also offset any losses they made on the cost of running their property against their other income, reducing the amount of income tax they paid.
In order for a second home to qualify as a holiday property, it must be furnished, run as a commercial business and available to be rented by the public for at least 140 days a year.
In order to attract the current tax benefits it must also be let out for at least 70 days a year.
The rules previously only applied to second homes in the UK, meaning that the Government was contravening European Union legislation.
As a result, the tax treatment will be expanded to include all second homes in the UK or the European Economic Area until April next year, when it will be abolished for everyone.
However, the rule change will not be retrospective, so people who had bought a holiday home to defer paying a hefty capital gains tax bill will still not have to pay it until they sell the property..
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|Publication:||Western Mail (Cardiff, Wales)|
|Date:||Apr 24, 2009|
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