Individuals who have bought, or intend to buy a home overseas will no longer be faced with a benefit-in-kind tax instigated five years ago following an announcement in the Budget on Wednesday.
The tax was levied on individuals who had bought a house abroad through a private company, because the property they owned was seen as a benefit to the individual, and therefore potential rental income was taxed at 8% of the value of the house.
On a property worth £300,000, a 40% tax-payer would be charged £9,600 per annum, plus corporation tax on any rental income which the property did bring in.
However Wednesday’s Budget reversed this decision and allowed individuals who have been paying the tax to claim it back, a move welcomed by many who own second homes abroad.
‘With more and more people buying property abroad, it is encouraging to receive certainty on the rules for owning properties abroad via their own local company,’ said Leonie Kerswill, Partner at PricewaterhouseCoopers. ‘This is a very common situation that used to give rise to a benefit-in-kind tax charge, a peculiar result when the people concerned have funded the purchase themselves.
‘HM revenue and Customs’ attitude towards this issue has been inconsistent and we are delighted that the new rules will be retrospective,’ she continued.