Owning a holiday home abroad could be cheaper and simpler following changes in the Budget announced this week.
A tax on the assumed rental income from the property - whether or not the buyer lets it out - has been scrapped. The tax had deterred some buyers from purchasing a home abroad, according to accountants.Purchasing property in holiday destinations such as France and Spain through specially created companies allows the buyer to reduce the stamp duty and capital gains tax bills, and escape some complex succession issues. But it has also meant that owners must declare the property as a benefit, and pay tax accordingly.Richard Mannion, national tax director at Smith & Williamson, said: "The removal of this tax charge clears the path for property buyers to establish companies to make their property purchases abroad. We have had a number of clients who have binned plans to buy a holiday home as they did not want to risk the income tax charge."A number of big accountancy firms have in recent years been advising clients not to use company structures to buy their holiday homes abroad, even though these carry significant benefits.Phillip Wood, investment adviser at PwC, said: "We can now revisit these company structures, which is good news for clients."Buying property though companies has a number of advantages. In France, for example, it allows the property owner to sidestep the so-called "forced inheritance" rules, which dictate who inherits the property on the owner's death. In the US, property buyers favour corporate structures as these offer greater protection in the event of an insurance claim against the owner - if, for instance, a visitor is injured on the property.In Bulgaria, foreign direct buyers cannot purchase the freehold on a property but must start up a Bulgarian company to hold the asset on their behalf.People who have already bought properties through companies can claim refunds for any tax they have paid, plus interest. The Treasury estimates that 90,000 people own a property in this way.
Source: Financial Times
