Furnished Holiday Lettings

Furnished Holiday Lettings

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I have owned 2 foreign properties since app 2004. One in USA & the other in Portugal (PRT). I am being told that from 2011/12, details of the PRT property have to be included in the HMRC Tax Returns for UK & EEA properties section. As such, I am also being told that the 10% Wear & Tear allowance which I have been claiming in previous tax years is no longer available. As such this means that my taxable income for UK Tax purposes will be increased substantially compared to previous years. Is this correct ? If so, how else can I reduce my taxable UK income - e.g. Capital Allowances, AIA & other similar allowances. But even if any of these are available, it would rely upon capital expenditure being made in the future or during 2011/12 which is unlikely. In the past I have obviously not claimed for Capital Allowances, does this mean that I can revisit those years for Capital Expenditure - e.g. installation of water systems, air conditioning/heating system etc ?

Any suggestions/advice would be greatly appreciated

Frank James

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By eastangliantaxadvisor
05th Nov 2012 08:49

In respect of entering EEA properties on the UK sections, this has been the case since a technical note issued by HMRC in 2009.

the 10% Wear and Rear allowance is only available for Furnished Residential Lettings, and NOT Furnished Holiday Lettings, and so it may be you have incorrectly claiming these in the past on the EEA propetrty following the change in rules above.

 

You may claim Capital Alliwances etc. I suggest you read the rules and guidance on the HMRC website, see http://www.hmrc.gov.uk/manuals/pimmanual/PIM3000.htm onwards

 

The self aseesment helpsheets also contain useful summaries:-

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=eivrfAKnP64&f...

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=L902pc5Wsb8&f...

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By plummy1
05th Nov 2012 19:05

Capital Allowances Fixtures

If your property in Portugal meets the qualifying criteria for a furnished holiday let you will be able to claim  a proportion of capital allowances for the years 2010/11 & 2011/12. This includes fixtures such as the heating system but also sanitary wear. Typically the pool of capital allowances is the equivalent of 25% of the purchase price plus any major refurbishment work.  

You may need to services of a capital allowances specialist to do this and to get the full benefit the work needs to be completed before 31st January 2013.

John Plumridge

www.curtisplumstone.com 

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Replying to Neil Booth:
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By Frank James
07th Nov 2012 13:33

FHL in Portugal

Hi John

Many thanks for your reply which is most useful.

My property in Portugal qualifys as FHL. Up to & including 2011/12 Returns my Accountant has reported my USA & Portugal property details on the Foreign pages of the Return & has not entered details of my Portugal property as an EEA property in the UK property section of the Return. Could you possibly answer the following questions for me please :-

1) My Accountant (whose services I have now stopped using as I will be doing future years myself), has added the small annual profit I make on the Portugal property to the larger loss I make on the USA property to arrive at a net loss overall to be carried forward to subsequent years. Presumably this has been correct until HMRC changed the rules, is that the case ?

2) In those previous years, as my USA property is let on on long term lease (1 year plus as required by USA fiscal legislation), my Accountant has not claimed 10% wear & tear allowance on that property but has done so (up to & including 2011/12) for my Portugal property

3) From what Tax Year should my Portugal property have been reported under the EEA UK section of Returns & from what Tax year should I have stopped claiming the 10% wear & tear?

4) For future years I intend to report details of my Portugal property correctly under the EEA UK property section. Obviously I will not be claiming 10% wear & tear which will produce a higher profit on the Porugal property. My USA property will continue to make losses & I intend to offset the profit from the EEA Portugal property against the losses on the USA property. Is this correct ?

5) As the carried forward losses from previous years for my next Return will be the accumulated net losses of the USA property reduced by the profits from the Portugal property is it o/k for me to use the whole of the calculated joint losses or will I need to isolate from previous years, back to whenever I should have stopped claiming wear & tear, that element relating only to the USA property.

6) You say that I may be able to claim 25% of the purchase price of the Portugal property. Can I go back over all previous years to claim this or only back to when I should have stopped claiminh wear & tear. How exactly does the 25% capital allowciateance work & against what is it offset ?

Any hekp you can give me would be much appreciated

 

 

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By David Treitel
11th Nov 2012 16:33

US taxes

It would be worth looking also again at the US rental property as well to make sure that all expenses such as inspection visits are included and that the US tax returns that have been filed to date have been claiming the optimum depreciation method - otherwise there is a risk of increased and unnecessary tax on eventual sale.

 

David Treitel | Managing Director | American Tax Returns Ltd

Email: [email protected] 

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