HMRC Clarifies Holiday Homes' Taxation

by Robin Pilgrim, LawAndTax-News.com, London

28 August 2008

Her Majesty's Revenue and Customs (HMRC) has announced this week that it has added two new sections to the Income Tax Act 2003, which will allow the purchase of certain holiday homes to become exempt from the living accommodation tax.

These new sections will enable UK resident individuals who were advised to acquire a holiday home abroad through a company because of the laws of the country where the property is located (and who then paid income tax before 2008-09 on the benefit of that living accommodation when they have not used the company other than to hold the property for their personal use and letting) to claim exemption from the living accommodation tax charge, outlined in ITEPA, and to apply for a refund if they can show that they have paid such tax.

According to HMRC, to qualify for exemption from the living accommodation tax charge, an individual must be living in accommodation outside the UK which is provided by a company for a director or other officer of the company, or a member of the director's family or household where all of the following apply:

1. the company is wholly owned by the director and other individuals (and no interest in the company is partnership property)
2. the company’s main or only asset is a relevant interest in the property
3. its only activities are ones that are incidental to its ownership of that interest.

Any individual who can show that they have paid income tax for any year before 2008-09 on the benefit of living accommodation which qualifies for exemption must write to HMRC informing them of their circumstances.

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