It has not been widely reported that, following changes announced in the latest Budget, landlords with income from furnished holiday accommodation elsewhere in the European Union are now allowed to make the same types of claims as were previously only available for such lettings in the UK.
In practice, this means that some owners of foreign holiday homes, who have rented them out as furnished holiday lettings in order to defray the costs, will be able to claim tax repayments on any losses they have suffered, by setting the losses against their other income.
Full details are contained in the relevant HM Revenue and Customs technical note.
The criteria necessary for a property to qualify as a furnished holiday letting are onerous and those relating to the period for which the property must have been let are often not satisfied.
It would be unwise to make a claim without first considering the options carefully. In particular, the financing of foreign homes is often undertaken indirectly and this may lead to the interest paid on a mortgage on a foreign property (usually the largest expense) being disallowable as a deduction and might turn a ‘loss’ into a profit for tax purposes.
The current favourable tax treatment for furnished holiday lettings is being abolished from the next tax year.