Around £1 billion of tax rebates through capital allowances on furnished holiday lets (FHLs) could go unclaimed with the imminent removal of a significant tax relief, according to Manchester-based capital allowances firm, CA Tax Solutions.
It is estimated that around 450,000 holiday homes are currently owned by UK taxpayers, of which 100,000 could qualify for a substantial tax refund. For owners who purchased their holiday homes before 4 April 2010, they could be due a tax rebate of as much as £10,800.
As of 31 January 2012, owners of Furnished Holiday Lets (located in the UK and EEA) will no longer be able to offset capital expenditure relating to their FHL against their total income. Instead, they will have to offset capital expenditure against profits from the same FHL business. This effectively signals the end of this valuable tax allowance as very few FHLs make a profit.
CA Tax Solutions says the removal of this tax relief is relevant to FHL owners because a significant percentage of them will be sat on unclaimed capital allowances over a period of years that, for tax purposes, are deemed to be a loss.
It advises that these people should be taking a detailed look at their capital allowances now to generate as big an historical tax rebate as possible before the end of January that can then be set against their total income over the next two qualifying tax years.
The £1 billion figure is based on 450,000 holiday homes owned by UK taxpayers, of which an estimated 100,000 of those purchased before 4 April 2010 would qualify.
Taking an average purchase price of £250,000, an estimated 30% of the purchase price can be identified in capital allowances. This equates to £75,000 in capital allowances.
Dave Collier, director, CA Tax Solutions, said: “Any UK taxpayer who owns a furnished holiday let
