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Holiday lets can prove taxing

Employees who use company-owned leisure or holiday properties could find themselves facing an extra tax bill. 

Dozens of local businesses have invested in holiday homes as a tax-efficient investment, and regularly make them available to directors and other employees.
 
But Dyke Yaxley's Tony Elliott said it was important for staff who took advantage of such perks to realise the tax implications.
 
“If a company-owned property is used by you and your family, it will count as a taxable perk, and the tax can be pretty stiff. For example, if a company owns an apartment which cost £180,000 and a director used it for about two months each year, the tax bill would run into thousands of pounds.
 
“Assuming the director was a 40 per cent taxpayer, they would face an additional annual bill of around £8,500. This is because the tax charge is worked out as if the employee used the property all year round.
 
“There are some HMRC concessions available if properties are available to other directors or senior employees though, which can dramatically reduce the tax liability, so it is important to investigate.
 
“For the company itself, there are several advantages of investing in property.
 
“Company ownership can reduce capital gains tax when it is sold, and if it is offered as a perk to directors and staff, the company can claim a tax deduction for all maintenance and ongoing running costs.
 
“But it’s vital to take professional advice before you commit to purchasing a holiday property so that you can maximise any tax benefits and minimise any liabilities.
 
“Although a property like this can sound idyllic and the perfect antidote to the stresses and strains of the working week, it can quickly turn into a nightmare if you don’t take the appropriate steps to protect yourself.”
 
Dyke Yaxley's Senior Tax Planner, Tony Elliott
 
 

The Author

Tony Elliott

Tax Director

Tony joined Dyke Yaxley in 2013 as Senior Tax Planner, providing technical expertise on a wide range of taxation matters…