MANY Britons who let out their European holiday homes could be entitled to a tax rebate under measures announced in April’s budget. From next year, however, all tax breaks on second homes in the UK and abroad will be abolished, removing any tax barriers that might encourage Brits to invest in property at home rather than overseas.
The scheme gives those with second homes in the EU the same rights as those with holiday properties in the UK until April 2010. People who let out their property but still make a loss, or who have sold the house at a profit, may be able to claim tax repayments for as far back as 2003.
“In the short term this will provide a more favourable treatment for some of those who let out their foreign properties,” Michael Axelrod, commercial director of international mortgage broker Conti, told OPP. “This won’t affect all foreign property owners but a lot of people will fall into this category and the amount of tax they can reclaim could be quite high for some of them.”
Mark Tuckwell, head of the Midlands office for Target Chartered Accountants, said: “Anyone thinking of selling their foreign holiday property might want to do so before 6 April 2010 to take advantage of the extra capital gains tax relief on eligible properties. Clearly, tax will always be secondary to how much money they can make from the sale of the property.”
Levelling the playing field
EUROPEAN law requires countries to have standard tax rules for those who own property at home or in any other EU state. Granting the same relief to UK and foreign properties would cost the government £15m so, instead, all tax breaks will be abolished next year.
“With the tax incentive removed, people might think about investing in holiday let property abroad instead of just in the UK because there will be a more level playing field,” Tuckwell told OPP. “From 6th April 2010, holiday let property will be treated equally wherever it is in the world. All in all, these changes may make it easier and more attractive for UK nationals to invest in overseas property.”
However, Bill Blevins, managing director of international tax specialists Blevins Franks, remained sceptical about how much this would affect buyers’ decisions. “You’ve always got to look at the big picture – savvy investors will be looking for returns and growth,” he told OPP.
“There might be no tax in somewhere like Dubai but British buyers still have to pay UK tax on investments there. Buyers should go for what they want and make it as tax efficient as possible.”