Furnished Holiday Letting Campaign

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July 2009 Roadshow Presentations

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Furnished Holiday Letting Campaign

  1. 1. FURNISHED HOLIDAY LETTING TAX CHANGES ROADSHOW WHAT DO I NEED TO DO NOW? www.winterrule.co.uk
  2. 2. <ul><li>PROGRAMME:- </li></ul><ul><li>Presentation by John Endacott, Tax Partner </li></ul><ul><li>Update on campaigning by CAHHA by Simon Tregonning, Classic Cottages </li></ul><ul><li>Question & Answer Session </li></ul>
  3. 3. <ul><li>WHAT’S ALL THE FUSS ABOUT? </li></ul><ul><li>Distinction between business and trade </li></ul><ul><li>What is the definition of a trade? </li></ul><ul><li>Not well defined by tax legislation </li></ul><ul><li>Reliant on case law </li></ul>
  4. 4. DEFINITION OF TRADE IN TAX LEGISLATION: “ Any venture in the nature of trade”.
  5. 5. <ul><li>CASE LAW - Gittos v Barclay (1982) </li></ul><ul><li>High Court decision </li></ul><ul><li>Finding of facts by General Commissioners </li></ul><ul><li>Looks like a bad decision! </li></ul>
  6. 6. <ul><li>FURNISHED HOLIDAY LETTING RULES </li></ul><ul><li>Introduced by Finance Act 1984 </li></ul><ul><li>Special provisions dealing with </li></ul><ul><li>- losses </li></ul><ul><li>- capital allowances </li></ul><ul><li>- apportionment of income </li></ul><ul><li>- capital gains tax </li></ul>
  7. 7. <ul><li>THE SPECIAL RULES </li></ul><ul><li>Available for letting for 20 weeks </li></ul><ul><li>Let for 10 weeks </li></ul><ul><li>Commercially let </li></ul><ul><li>Must not be continuously let for > 31 days in a 7 month period </li></ul><ul><li>Applies to UK and other EEA properties </li></ul>
  8. 8. <ul><li>INCOME TAX LOSS RELIEF </li></ul><ul><li>Against current year </li></ul><ul><li>Against prior year </li></ul><ul><li>Opening year losses carry back </li></ul><ul><li>Otherwise the same as for normal property business </li></ul>
  9. 9. <ul><li>CAPITAL ALLOWANCES </li></ul><ul><li>Only available if furnished holiday letting activity </li></ul><ul><li>Full write off for tax purposes up to £50,000 in one year </li></ul><ul><li>If > £50,000 then 20% or 10% WDA </li></ul><ul><li>Furnished lettings only </li></ul><ul><li>- renewals; or </li></ul><ul><li>- 10% wear and tear allowance </li></ul>
  10. 10. <ul><li>CAPITAL GAINS TAX </li></ul><ul><li>Entrepreneurs’ relief – 10% tax rate up to £1million </li></ul><ul><li>Roll-over relief – can reinvest gains </li></ul><ul><li>Hold-over relief – can make gifts with no immediate tax liability </li></ul><ul><li>Companies – impact on trading status </li></ul>
  11. 11. <ul><li>OTHER TAXES </li></ul><ul><li>VAT </li></ul><ul><li>Business rates </li></ul><ul><li>National insurance </li></ul><ul><li>Inheritance Tax </li></ul>
  12. 12. <ul><li>NATIONAL INSURANCE </li></ul><ul><li>Classes 2 and 4 </li></ul><ul><li>No special rules </li></ul><ul><li>Trading definition </li></ul><ul><li>Tax return assumes no national insurance </li></ul><ul><li>Does not apply once state retirement age reached </li></ul>
  13. 13. <ul><li>INHERITANCE TAX </li></ul><ul><li>Requirement to be a business NOT a trade </li></ul><ul><li>HMRC now contesting </li></ul><ul><li>Much more generous rules </li></ul><ul><li>Withdrawal of business property relief possible/likely </li></ul>
  14. 14. <ul><li>CURRENT POSITION ON LOBBYING </li></ul><ul><li>Actions so far </li></ul><ul><li>Need for consultation </li></ul><ul><li>Need to keep up the pressure on government </li></ul><ul><li>Clarification essential as a minimum </li></ul>
  15. 15. <ul><li>POSSIBLE OPTIONS FOR GOVERNMENT </li></ul><ul><li>Keep existing rules </li></ul><ul><li>Tighten existing rules (eg 15/30 weeks?) </li></ul><ul><li>Redefine trade </li></ul><ul><li>Introduce new rules </li></ul><ul><li>Withdraw certain tax breaks (eg, loss relief) </li></ul>
  16. 16. <ul><li>POSSIBLE ACTIONS PRIOR TO 6 APRIL 2010 </li></ul><ul><li>Sale </li></ul><ul><li>Gift to next generation/trust </li></ul><ul><li>Capex spend </li></ul><ul><li>Change to long term letting </li></ul>
  17. 17. TRANSITIONAL PROVISIONS?
  18. 18. UPDATE ON CAMPAIGNING BY CAHHA BY SIMON TREGONNING, CLASSIC COTTAGES
  19. 19. QUESTION & ANSWER SESSION
  20. 20. LOWIN HOUSE TREGOLLS ROAD TRURO CORNWALL TR1 2NA TELEPHONE: 01872 276477 EMAIL: [email_address]

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