Recap of holiday home news: 30 October 2009
Spanish apartments due to be demolished advertised to UK buyers
Apartments on a development in Marbella which was built illegally and has been condemned to demolition, are still being advertised on websites targeting UK buyers.
Unfortunately, hundreds of existing owners at the development, many of them Britons, face their homes being demolished, with no compensation offered.
The worrying thing is that buyers followed sensible practice when purchasing property. They used an independent Spanish lawyer and saw for themselves documents issued by Marbella council, apparently confirming the legality of the land and building work. Unfortunately they fell foul of corrupt council officials, some of whom are now in jail.
Following the bad publicity, lawyers, notaries and mortgage providers will no doubt make it their business to dig deep when conducting searches.
With up to 40% off some Spanish property, don’t be tempted to rush into a purchase. Do your homework.
Tax breaks to be abolished for holiday let owners
Under legislation to be announced by the Chancellor Alistair Darling in his Pre-Budget Report, second home owners will be hit with a “stealth tax” of thousands of pounds a year.
The move will hit an estimated 60,000 holiday let owners, who will have their tax breaks abolished.
The Treasury has justified the change by saying that the old taxation system, under which Britons who rented out holiday homes in the UK enjoyed greater tax benefits than those who rented out holiday homes elsewhere in the EU, breached European law.
Currently, under the furnished holiday letting scheme, landlords who rent out holiday accommodation in Britain are treated as traders rather than investors as long as their homes are furnished, available to rent for at least 140 days a year, and actually rented out for at least 70 days a year.
As a result they can offset the cost of furniture and fittings – often thousands of pounds each year – against earnings; pay a reduced capital gains tax when they sell; enjoy some inheritance tax benefits; count earnings when calculating pension relief; and write off trading losses against other income, which reduces the amount of income tax they pay.
But following the changes such landlords will be classified as investors and the tax breaks will be taken away.
Business analysts are warning that the tax change could force thousands of owners to stop letting out their second homes, with devastating consequences for the tourist trade. They say that businesses will close and jobs will be lost, while the knock-on impact could cost the tourist industry £200 million annually.
If you are considering investing in a UK holiday home consider these tax changes and seek professional tax advice if necessary.
Proposed Abta scheme to protect flights booked directly - telegraph
Holidaymakers who book flights directly, may soon enjoy the same protection as those booking a package holiday.
Abta is hoping to introduce a scheme under which travel agents could safeguard the money of holidaymakers who buy flights separately. The change would close the loophole in the current system under which Britons can lose money in the event of an airline failing.
At the moment only holidaymakers who book with companies holding an Atol (Air Travel Organisers’ Licensing) bond are guaranteed their money back if an operator collapses.
This proposed scheme is good news for those with property abroad who only book flights, although it appears you have to book them through a travel agent. Ideally those who book flights directly with airlines need protection, although paying by credit card (as most do) provides some safeguards.
The cost of losing car hire keys - telegraph
For those who hire a car when visiting their overseas holiday homes and leave car keys lying around – take care of them.
From the telegraph:
Thieves broke into our holiday home in the south of France, stole the keys to our hire car and drove off with it. We filed a report with the police and telephoned the car hire company, which said we would be liable for the insurance excess of €1,500.
This was bad enough; worse was to follow. When we dropped off the police report at the car hire desk, we were told that we would have to pay another €15,000 because the car had been driven away using the keys.
This was because in the small print it stated that, if the keys are not returned then the customer can be charged the full value of the car because the terms of the insurance are invalidated.
Fortunately they did not have to pay the €15,000, but this does highlight the importance of taking great care of car keys and reading small print.
The next time you place your car keys on a table in a restaurant or on your towel at the beach, remember this scenario.
Nicolas Cage’s second home investment flops
Nicola Cage, who won an Oscar for Leaving Las Vegas, has spent at least £30m over the past decade buying second homes in America and Europe.
The Hollywood actor fell in love with Bath’s Georgian heritage so deeply, that he bought three homes in the area at the top of the property bubble. Sadly for him, he is downsizing at a loss.
The Oscar winner bought Midford Castle, a grade I-listed folly near Bath, in July 2007 for £4.75m, it is now understood to be on offer at £3.5m.
The castle was the third property the actor bought in the area in just over a year. In May 2007 he spent £3.8m on an elegant townhouse in the Circus, Bath’s famous Georgian crescent. Cage sold it last March for a loss of £300,000.
Unfortunately Cage’s second home investments in Bath don’t seem to have turned out so well.