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HMRC have published some guidance on the effects of FA 2008, s. 45 on holiday homes purchased through a limited company.

Finance Act 2008, s. 45 inserts new ITEPA 2003, ss. 100A and 100B.

The new sections enable UK resident individuals who were advised to acquire a holiday home abroad through a company because of the laws of the country where the property is located (and who then paid income tax before 2008-09 on the benefit of that living accommodation when they have not used the company other than to hold the property for their personal use and letting) to claim exemption from the living accommodation tax charge outlined in ITEPA and to apply for a refund if they can show that they have paid such tax.

The new legislation provides for an exception from the living accommodation tax charge where living accommodation outside the UK is provided by a company for a director or other officer of the company (“D”) or a member of D’s family or household where all of the following apply:

• the company is wholly owned by D or D and other individuals (and no interest in the company is partnership property);
• the company’s main or only asset is a relevant interest in the property;
• its only activities are ones that are incidental to its ownership of that interest.

As the living accommodation tax charge was not intended to apply to these circumstances, FA 2008, s. 45(2) provides that ITEPA 2003, ss. 100A and 100B are to be treated as always having had effect.
This means that where the provision of living accommodation outside the UK satisfies the statutory conditions, no liability to income tax in respect of the benefit of that provision arises for any tax year.

Any individual who can show that they have paid income tax for any year before 2008-09 on the benefit of living accommodation which qualifies for exemption under section 100A should write to: Michael Robinson, c/o Debbie Green, HM Revenue & Customs, CPPT Directors Office, 5th Floor, Trinity Bridge House, 2 Dearmans Place, Salford, Manchester, M3 5DT.