Holiday homes abroad purchased through a company

The enactment of section 45 Finance Act 2008 inserts sections 100A and 100B into the Income Tax (Earnings and Pensions) Act 2003 (‘ITEPA’).

These new sections will enable UK resident individuals who were advised to acquire a holiday home abroad through a company because of the laws of the country where the property is located (and who then paid Income Tax before 2008-09 on the benefit of that living accommodation when they have not used the company other than to hold the property for their personal use and letting) to claim exemption from the living accommodation tax charge outlined in ITEPA and to apply for a refund if they can show that they have paid such tax.

Qualifying conditions for exemption

The new legislation provides for an exception from the living accommodation tax charge where living accommodation outside the UK is provided by a company for a director or other officer of the company (“D”) or a member of D’s family or household where all of the following apply:

  • the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property)
  • the company’s main or only asset is a relevant interest in the property
  • its only activities are ones that are incidental to its ownership of that interest

As the living accommodation tax charge was not intended to apply to these circumstances, section 45(2) FA 2008 provides that sections 100A and 100B ITEPA are to be treated as always having had effect.

This means that where the provision of living accommodation outside the UK satisfies the statutory conditions, no liability to Income Tax in respect of the benefit of that provision arises for any tax year.

How to claim exemption and a tax refund

Any individual who can show that they have paid Income Tax for any year before 2008-09 on the benefit of living accommodation which qualifies for exemption under section 100A should write giving the information below to:

Michael Robinson
c/o Debbie Green
HM Revenue & Customs
CPPT Directors Office
5th Floor
Trinity Bridge House
2 Dearmans Place
Salford
Manchester
M3 5DT

Information to be provided:

  • name, address, National Insurance number and/or Unique Taxpayer’s Reference
  • if agent acting – agent’s name and address
  • details of the living accommodation outside the UK – address, type of property, uses made of the property
  • details of the company through which living accommodation outside the UK is provided including name, address, nature of company/entity, place of incorporation, ownership and activities
  • an explanation of why they consider that the exemption applies
  • the years for which tax has been paid on the benefit of this accommodation
  • evidence that the benefit of the accommodation in question has been taxed – acceptable evidence would include for each year copies of one or more of the following documents which clearly show the benefit as taken into account as taxable income:
    • assessments/self-assessments
    • P11Ds
    • coding notices
    • correspondence with HMRC or the former Inland Revenue

Note that the above list is not intended to be exhaustive. HMRC will consider any other documentary evidence in the individual’s possession that the individual believes to show the benefit as having been taxed.