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Holiday home owners back in business with preelection trade off

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Property owners who let out second homes to holiday makers were thrown into confusion last week after the Tories forced a u turn on the Government's tax policy for second homes. In the course of horse trading over the Budget the Government agreed to drop proposals to end beneficial tax breaks for holiday-home owners in return for agreement on the rest of the budget. The turn-round means that, provided certain criteria are fulfilled, letting out a second home for holiday lets will continue for the time being to be treated as if it were a business, with the result that: • Losses can be offset against other income of the owner, not just the letting income • The property let is treated as a trading asset and so it is eligible for roll over relief (any capital gains tax charge was deferred if you bought a replacement holiday letting property within three years of the sale); also hold over relief is available on a gift of the property (any gain arising on a gift of the property may be postponed so that, in practice it becomes the liability of the recipient). • Plant and machinery allowances are available for capital expenditure on furniture and equipment. • The letting profits were relevant earnings for the purpose of calculating the maximum relief allowed for pension contributions. To qualify for the relief the property must be furnished; it must be available for commercial letting to the public as holiday accommodation for at least 140 days a year and it must be commercially let, at a full commercial rate, as holiday accommodation for at least 70 days a year. The holiday lets must not be more than 31 days in duration and they must be the only lettings of the property for at least 210 days a year, so you would not qualify if you let a property to students for the academic year and then to tourists during the summer vacation. The property can be in the UK or in the EU. The Government had announced that these tax benefits would end from 1st April 2010. Said Edward Worthy of Chelmsford Lawyers, Gepp & Sons: "This announcement will not be welcomed eagerly by everyone. Many holiday home owners will have already taken action in time to adapt to the new regime that was proposed from April 2010. "It means that some may have installed facilities to provide services to holiday makers and may now be wondering whether they have wasted their money. Others may have decided to sell up and may now be regretting having sold when the market is low. "Even those who did nothing cannot afford to celebrate: if Labour win the election, it's likely they will withdraw the relief and we will be back to where we were on 1st April." • For additional information please contact: Edward Worthy of Gepp & Sons. The above is not legal advice; it is intended to provide information of general interest about current legal issues.