Budget 2007 holiday homes

Hundreds of thousands of people who have bought overseas holiday homes through companies will enjoy lower income tax charges following the Budget in March 2007. Prior to the Budget these holiday homes had a "Benefit in kind" tax charge on individuals who purchased their holiday home via the company.

A higher tax rate payer who purchased a property worth £500,000 with a notional rental yield of 8 per cent would have been liable to pay income tax of £16,000 per year.

The removal of this charge will be retrospective, so any one who has been dutifully paying the tax in previous years can now claim a refund from the Inland Revenue.

Properties owned by companies can often escape capital gains tax and stamp duty and benefit from lower tax rates on rental income. Also punitive wealth taxes charged by many European countries typically do not apply to corporate structures.

The removal of the charge applies to companies who sole activity is holding the property for personal occupation and/or letting. The property has to be the company's only or main asset.