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02 Aug 2009
European holiday home tax relief
People who own a holiday home in Europe and have made a loss on renting out the property, could be eligible for a tax rebate.
Furnished holiday lettings (FHL) relief allows owners of holiday homes to offset against their income expenses that qualify for capital allowances, that is, the value of fixtures and fittings as well as equipment such as refrigerators and washing machines.
Until the last budget, this was only available to people with holiday homes in the UK. However, this was deemed to be in breach of EU law, so FHL relief has now been extended to those with properties in Europe.
Losses do not have to be set against rental income from the property, but can be offset against general earnings, including a salary or profits from self-employment.
The window of opportunity to take advantage of the tax break is narrow as the Government plans to withdraw FHL relief altogether from April 2010.
In order to qualify, your holiday home must be within the European Economic Area (the 27 EU member states plus Iceland, Lichtenstein and Norway). It must be let furnished for at least 70 days during the tax year in which the claim is being made (in this case, 2006/7), and it must have been available for letting for at least 140 days. It should not normally be occupied by any one tenant for more than 31 days at a time.
In order to claim the relief, you need to submit a self assessment form to HM Revenue and Customs or make an amendment to your self-assessment form if you have already submitted one.