Those who have invested in holiday accommodation to let should get tax relief on their property while they still have the chance as it is set to disappear, warns accountancy firm Old Mill.
Owners of furnished holiday properties will see their tax relief slashed next year, as part of Chancellor Alistair Darling's Budget for the 2009/2010 tax year, so Old Mill is urging investors to take action now before it is too late.
As part of the Chancellor's package of changes to the UK tax system, from April 6 2010, holiday homes will no longer be seen as a trade, but an investment, so the way they are taxed will change accordingly, matching that of other rental properties.
Consequently, investors will therefore lose much of the tax relief associated with trading assets, Old Mill partner Mike Butler explains.
The primary changes to how holiday properties are taxed will concern Capital Gains Tax relief – rollover relief will disappear, so if the property is sold in the future, owners will no longer be able to rollover the gain into the further trading assets. Holiday lets will also no longer be a qualifying asset into which to roll a gain.
Mr Butler explains that changes to Entrepreneurs Relief will cause further disappointment: "Those that have been running holiday lets as businesses may have expected to be able to claim the reduced 10 per cent Capital Gains Tax rate on selling a holiday let property when it eventually came to retire or dispose of the business," he said, "but unfortunately, that relief will no longer be available for holiday lets."
Holdover relief another form of Capital Gains Tax relief which is set to go, Old Mill warns, where holiday properties to let are passed down to other generations in order to sidestep Capital Gains Tax.
Old Mill is encouraging investors that expect to be affected by the changes in tax law to act now before that ship has sailed.
"There is a window of opportunity to plan in advance prior to 6 April 2010, and tax payers owning holiday lets must be talking to their accountants right now to identify what actions they do need to take," says Mr Butler.
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