Holiday Homes – Tax Breaks for Company Owned

Fed up of our cold wet summers?  A holiday home on the continent could be just the answer but sadly, holiday homes don’t come  cheap to buy or run. 

Personal Tax Costs -v- Company Purchase Option

Being able to afford the running costs is one thing, but then finding the capital to buy even a small property might put a drain on your savings,  especially where you meet the cost out of your taxed income.

One answer could be to draw the money from your company to fund it, but even if you took this as dividends to avoid NI you’ll still have to pay income tax at higher rates.

Instead, you could get your company to pay,  but what are the pros and cons of doing this?

Your company could buy a property as an investment and allow you to use it when you want. Apart from avoiding immediate personal tax charges, this has another advantage.

Your use of the property counts as part of your remuneration package, which means your company can claim a tax deduction for the cost of providing the property.  This is not the purchase cost, but all the running expenses, e.g. heating, repairs, local rates, etc. If you had paid for these out of your own personal savings none of these would qualify for a deduction.

However, if your company purchases a property for use only by you and your family, you’ll pay tax on a benefit in kind (BiK) as if you used it all year round, not just for when you actually do.

You can also reduce the tax and NI bill by offering other employees use of the property.  You and your company can take advantage of an HMRC concession known as ESC A91. The effect of this is that the BiK won’t be based on a whole year’s use of the property, but instead the amount you would pay if you rented the property from your company at the market rate.

Your company can claim a tax deduction for the running costs of a property it owns and allows directors and employees to use, but as a result they’ll be taxed on a benefit in kind. Tax can be kept to a minimum by opting to use HMRC’s concession A91. This restricts the BiK to when the property is being used.