UK renews holiday home let tax break

BRITISH residents who rent out their holiday homes in France for a substantial part of the year will continue to benefit from a special tax regime, but under tougher conditions.

The Labour government had planned to scrap the furnished holiday lets regime this year.

However, to benefit you will now have to rent your home for longer and one of the advantages, the chance to deduct related expenses from your taxable income, is to be made less favourable.

The changes are not yet fixed and are open to public consultation, but it is planned that they will be come into force from April 2011.

Under the proposed rules:

- A property must be available for letting for 210 days a year, instead of 140, and must be let for at least 105 days, instead of 70.
- Expenses from the property, such as mortgage interest, can be deducted only from income declared from the property.

According to London-based tax lawyer David Anderson, of Sykes Anderson, the move is good for those with French holiday homes.

In sought-after areas such as the Côte d’Azur, the centre of Paris or ski resorts, the tax advantages should encourage more people to do so.

The proposed changes to the scheme are intended to make the benefits apply to “more business-oriented” leasing, Mr Anderson said. “Most people who rent properties in a commercial way will easily be able to benefit providing they are in an areas with tourist demand.”

Included in the regime should be leaseback schemes, a popular French property investment, he said. This involves buying a flat from a developer, then signing a commercial lease with a company that rents it to tourists and pays you a guaranteed income.

More info: www.tinyurl.com/lettingtax