Tax position on new overseas letting

silvercar

I have been reading the guidelines from hmrc on the tax due on a holiday letting overseas (outside EEA). I would appreciate your views:

Property was bought Summer 2012. It is intended as a holiday home and holiday letting ie we bought it with the intention of letting it out and as a holiday place for ourselves. Our financial model is that it is available for lettings at peak times and we or family restrict ourselves to using it at other times.

The basic rule AIUI is that when it is not occupied by ourselves it is available for let. So if we occupy 6 weeks of the year then 46/52 proportion of the running costs/ interest etc are allowable as an expense.

As it is the first year of operation there are some grey areas as I see it.

We have made 3 visits there this financial year:
1. To take possession, basic furnishing, appoint agents, legal stuff - dual purpose (letting and personal use)
2. mainly holiday but some time on letting issues, more furnishings etc
3. Final preparations before lettings at full rates.

I would have said 3 and part of 1 are for the lettings business. This is important because the cost of flights to visit is not cheap!

In the first year, is it important when it was first ready to be let - for apportioning how much of the costs can be attributed to the business? Or is the significant thing the date when it was first let?
It was first let when it was partially furnished as a friend wanted to take it just for a place to sleep and so they "rented" it for a peppercorn (but you could argue this was the market rent for something with little more than a bed!). The first decent rent only happened in March.

holly_hobby

Presume you reside and are liable to UK taxes - under which your rental income reciepts will be declared.

Re point 2 - due to the dual aspect underpinning trip (lesiure & bus), I don't think the travel cost willbe a permitted deduction, as it was not made wholly and exclusively undertaken for the purpose of the business. Have a read of the attached ref notes - http://www.hmrc.gov.uk/manuals/bimmanual/bim42130.htm

http://www.hmrc.gov.uk/manuals/bimmanual/BIM37610.htm

Otherwise, you are permitted to offset permitted deductions as you would be able to if the property were in the UK - associated property management/letting/professional fees, mge interest, travel costs where wholly for bus purposes, maintenance and service fees, etc (list not exhaustive).

Where dual use, as you say, the applicaton of direct costs/expenses incurred and attributable to the business, are permitted for the associated defined period/bus element - http://www.hmrc.gov.uk/manuals/bimmanual/bim42130.htm

Deductable costs are permitted from when it first became part of the business (ie avail for let) - and not restricted to when actually tenanted.

As always, please verify tax comment with your tax practioner and/or HMRC.

Hope this helps

Holly

jimmo

Erm that sounds familiar.
https://forums.moneysavingexpert.com/discussion/3836517

silvercar

jimmo wrote: »

Erm that sounds familiar.
https://forums.moneysavingexpert.com/discussion/3836517

Yes. It all happened We completed Summer 2012, have visited 3 times now, had our first rental income and have it booked for 4 weeks in the Summer.