Tax refunds on holiday property

If you have a commercial furnished holiday let within the EU, then there is potential for a tax refund.

Did you know up to 30% of the purchase price of a furnished holiday letting may be eligible for capital allowances? If these allowances are higher than your profits from rental income, any excesses may be set against tax payable on general income such as salary or business profits. There is a limited window of opportunity to make use of this “set off”, or sideways loss relief, as it will only be available until 5th April 2011.
Capital allowances are available on plant and machinery such as fitted kitchens, plumbing, central heating, loose furniture, and equipment.

backyard swimming pool

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How it works
Typically, the level of plant and machinery is between 10 and 30% of the purchase price of the property, for example:

On a £500,000 property in Spain, the potential allowances are up to £150,000 made up of heating system, swimming pool, sanitaryware and electrics, amongst many others

This would translate to a total tax saving of £75,000 for a 50% tax payer!

What conditions must you satisfy?
The property must be in the UK or in the EU
The property or properties must be run on a commercial basis
Available to let for 140 days per year, and actually let for over 70 days per year
Not let to long term tenants for over 155 days per year
Long term letting is to the same person for over 31 days

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