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Holiday homes could make you £20,000 a year

02 March 2005
Research has revealed just what a pot of gold a holiday home can prove.

Foreign villa renters MyVillaRenters have stated that a foreign home worth £200,000 will have an annual rental value of £20,000 - together with any increase in the value of the property.

"In some parts of Europe, holiday lets can pull in as much income over the six week school summer holiday period as a traditional UK rental property would generate in over six months," said Tim Coulton, the company's managing director.

Putting rental value together with tax benefits, MyVillaRenters estimates that owners of second properties are losing a collective £200 million a year by not offering the house for rent.

"The tax liability will be reduced if the property is available for letting to third parties for most of the year - as the Inland Revenue will tax you as though you were there all the time unless you rent it out," Mr Coulton explained.

Significant tax benefits can be gained provided the the property is treated as a business asset - for which it must be available to rent 140 days a year, actually be let for 70, and not be occupied by the same person for more than 31 consecutive days for a period of seven months.

By being classified as a business, owners not only get immediate benefits from the Inland Revenue, MyVillaRenters asserts, but when the property is sold, owners qualify for business asset taper relief on any capital gain made - potentially reducing tax on any increase in value from 40 per cent to just ten per cent.

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