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Company Holiday Homes

If your family company has some spare cash, and doesn’t know what to do with it, then spend it on a Villa in Spain or a cottage in the Lake District. That way, you and your family will have a ready-made holiday base, and it won’t have personally cost you a single penny.

But, you may ask, won’t the taxman hit you with a large benefit-in-kind tax charge each year?  In particular, might he argue that the property is available to you throughout the whole of the complete year, rather than just during your few weeks of the actual holiday?

Indeed, there will be a benefit-in-kind tax charge. But, in our view, the charge should only be modest, reflecting your period of use of the property and nothing more. Here’s how:

Firstly, it is interesting to note what the tax rules don’t say.  They don’t say that a charge arises when accommodation is ‘made available’ to you.  If they did, the tax inspector may well be able to argue that the holiday home is available to you for all (or most) of the year.

This ‘made available’ rule applies to company cars.  Living accommodation, on the other hand, attracts a tax charge only when it is ‘provided for’ an employee (or director) ‘in any period’.  When that happens, he is taxed only on  ‘an amount equal to the value to him of the accommodation for the period’. And that’s it.!

Naturally, there are some technical reasoning behind our assertions and advice should be sought before embarking on this route.