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UK tax change hits expatriates

New holiday home rules now in force and more restrictive guidelines on British tax residency have been released

BRITISH residents who let furnished holiday accommodation in France have lost certain tax advantages with the new tax year.

Previously landlords could offset the cost of repairs and furniture and fittings against capital gains tax when they sold. They could also use losses incurred on their letting business to lower their British income tax.

Now it is only possible to offset losses against certain income from that specific business. Further changes relating to the lets are on the way from April next year, increasing the number of days a year that properties must be let or available to let.

London-based international tax lawyer David Anderson, of Sykes Anderson David Anderson said: “The rules are becoming more restrictive but up until last year these perks could not be claimed on overseas properties anyway so it is unlikely to make many people worse off.”

HM Revenue and Customs have stated that expats who return to work in Britain for more than ten days a year may be considered to still be UK tax-resident.

This is the first time that HMRC has specified a number of working days. This could, for example, relate to Britons who live in France and attend some meetings in the UK. However, wider considerations of the tax agreement between the two countries would be considered.

An HMRC spokesman said they regularly update their guidance and this was not a change of policy but a clarification.
However he said many different factors come into play in deciding where a person is tax-resident, and working more than 10 days would not in itself be conclusive.

Mr Anderson said: “This is an interesting development and perhaps indicates the first stage of HMRC clarifying matters of residency in terms of definitive timings. Although it is relatively restrictive, it does at least set a definitive yardstick for people who will now feel more comfortable if they spend say eight days back in the UK at meetings during the course of a year.”

He added that residency is also subject, apart from to HMRC rules, to ones in treaties between the UK and countries where expats reside. Tighter rules from HMRC may encourage more people to move to countries which have treaties with the UK rather than some “traditional tax haven countries” that do not have them, he said.

Photo: Ivanhoe -

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