Tax relief from buying a caravan

pherring473

I own a caravan on the east coast and was thinking of buying a newer one and renting it out to regain some of the costs, I have heard that if I set up a business I could reduce my yearly tax.
Is this true and if so what will I need to do?
I would love to own a newer caravan and be able to have a few holidays each year whilst saving myself money.
Any information would be great

chrismac1

This is potentially a furnished holiday lettings business. But the key word in that sentance in my view is BUSINESS. The only way to reduce your tax bill is to make a loss in the business. This will happen in year one as the costs of purchasing the caravan are fully claimable PROVIDING the usual tests of a furnished holiday letting business are met - PM me if you want fuller details, but also note that there are likely to be changes on 23 March in the Budget making the qualifying criteria a bit tougher to meet.

What is a buinsess? Something that makes losses year after year will get looked into by HMRC on the basis that it is not a real business. The Tribunals and Courts are the final judges. The key thing is to be able to demonstrate an intention to make a commercial profit. A typical FHL client will market the house (normally it's a house) on websites with high visitor numbers, advertise in suitable publications and keep the house in really good order so they get repeat business and the FHL makes a decent profit

Your post implies that you're looking on this as some kind of tax dodge not a genuine commercial venture. This will work OK under self-assessment for a few years, just bang in the tax returns and they pay out the cash. BUT even our hapless HMRC must sooner or later wake up and pay you a visit. And if there is no evidence of an intent to make a profit they'll slap an assessment on you for all the tax they've repaid to you.

So question one is - is your intention to make a profit from this caravan as a business venture?

pherring473

The idea is to buy a caravan so that my family can have a few holidays each year but the costs are high and the caravan will be empty for most of the year so I thought if I could set up a business I could rent it out for the weeks I wasnt using it and recoup some money and if it was a success great, but if I found that I wasnt making enough I wouldnt be out of pocket as I could off set it against my tax.
I was looking to do it for at least 2/3 years to see if it would work and if not I would end the business.

chrismac1 wrote: »

This is potentially a furnished holiday lettings business. But the key word in that sentance in my view is BUSINESS. The only way to reduce your tax bill is to make a loss in the business. This will happen in year one as the costs of purchasing the caravan are fully claimable PROVIDING the usual tests of a furnished holiday letting business are met - PM me if you want fuller details, but also note that there are likely to be changes on 23 March in the Budget making the qualifying criteria a bit tougher to meet.

What is a buinsess? Something that makes losses year after year will get looked into by HMRC on the basis that it is not a real business. The Tribunals and Courts are the final judges. The key thing is to be able to demonstrate an intention to make a commercial profit. A typical FHL client will market the house (normally it's a house) on websites with high visitor numbers, advertise in suitable publications and keep the house in really good order so they get repeat business and the FHL makes a decent profit

Your post implies that you're looking on this as some kind of tax dodge not a genuine commercial venture. This will work OK under self-assessment for a few years, just bang in the tax returns and they pay out the cash. BUT even our hapless HMRC must sooner or later wake up and pay you a visit. And if there is no evidence of an intent to make a profit they'll slap an assessment on you for all the tax they've repaid to you.

So question one is - is your intention to make a profit from this caravan as a business venture?

John_Pierpoint

The days of the tax system subsidising the country pads of wealthy surtax payers may be restricted:

There has been a consultation and this looks like the position for new entrants in 2011 and existing businesses in the 2012 summer season:

http://www.hm-treasury.gov.uk/d/furnished_holiday_lettings.pdf


Will you be able to make a profit out of the investment in a caravan once site fees etc. are taken into consideration; I suppose Mr and Mrs "Smith" and the kids could "pay" you just enough for you to break even?

soulsaver

Interest paid on a loan to purchase the caravan could be offset against the income from the lets, thereby reducing your tax liability for that business.

harryhound

More comments on the tax changes here:

http://www.accountingweb.co.uk/topic/tax/changes-furnished-holiday-letting-regime/467139

(You might need to register to read it)