Finance Bill Tracking Service 2007 | Budget 2007 | Budget Notes

BN50 Homes abroad owned through a company

Who is likely to be affected?

1   Directors who have use of an overseas property owned by a company whose sole activity is to hold that property.

General description of the measure

2   The Government has today announced its intention to bring forward legislation in Finance Bill 2008 which will ensure that individuals who have bought or will buy a home abroad, will not face a benefit in kind tax charge for any private use of the property if purchased through a company.

3   Some UK resident individuals have set up or acquired companies to own a property abroad, generally for holiday use. Where they direct the company's affairs (whether through an agent or not) they can be within the scope of the living accommodation charge, although they may not have been aware of this or may have considered that no tax or NICs charge arose in these circumstances (and have not, therefore, reported the matter o HM Revenue & Customs (HMRC)).

4   This measure will remove that tax charge where certain qualifying conditions are satisfied.

Operative date

5   The legislation will ensure that all those who come within its scope will not face the benefit in kind tax charge – however long they have owned the property through a company.

Current law and proposed revisions

6   Chapter 5 of the Income Tax (Earnings and Pensions) Act 2003 sets out the tax position when accommodation is provided by an employer. Unless covered by a specific exemption a tax charge can arise where a property is provided by an employer to their employees, or to a director, when the property is available for their use.

7   The exemption will only apply to the benefit in kind charge. It will apply where an overseas property is owned by a company that is owned by individuals and whose sole activity is holding that property for occupation and/ or letting. It will have retrospective effect.

8   Draft legislation will be published for consultation later this year. HMRC will not seek to tax anyone in the intervening period where the following conditions are met:

•   The property is owned by a company owned by individuals;

•   The company's only activities are ones that are incidental to its ownership of the property;

•   The property is the company's only or main asset; and

•   The property is not funded directly or indirectly by a connected company.

Further advice

9   If you have any questions about this change, please contact the Employer Helpline on 0845 7143 143. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk