Changes to the taxation rules on furnished holiday lets could mean residential conveyancing solicitors will see an upsurge of second home property sales at the end of the summer season.
Many London property owners have a home on the coast in areas such as Brighton, where they can get away from the city at weekends and for holidays, but also keep the house as an investment or income-earner through lettings, depending on their personal wishes and circumstances.
Under the Government's proposals, which are intended to bring the UK in line with other EU countries and at the same time raise extra tax revenue, it will be more difficult for home-owners to qualify for tax allowances on furnished holiday lets.
A consultation document issued by the Treasury states that more than a quarter of the 65,000 property owners currently offering holiday lets will be ineligible for the current tax benefits from 2011-12.
The changes are meant to retain benefits for those who let out their properties as part of a business and restrict the advantages for people who use their holiday home regularly themselves then let it only occasionally to non-family members yet are still able to claim the generous tax allowances.
The Treasury is suggesting a home must be available to let in any year for a total of 210 days, rather than the current 140 days and, of that period, must actually be rented out for at least 105 days, rather than 70 days.
Rule changes on off-setting losses from furnished holiday lets are also likely to be made so that the owner can claim only against future profits from the same business rather than offset against other investment income.
Some other taxation help, such as capital gains tax rollover relief, is likely to continue if the rules are altered, as expected from April 2011.
Anyone considering buying a second home for use as a furnished holiday let or an investment is advised to consult an accountant for information on the taxation implications, as well as a residential conveyancing solicitor before the sale is agreed.
