Worries of holiday home owners who have bought overseas property with a company can finally relax as promised tax exemptions came in to force today.

The enactment of Section 45 Finance Act 2008 inserts sections 100A and 100B into the Income Tax (Earnings and Pensions) Act 2003.

These new sections allow UK residents who were advised to acquire a holiday home overseas through a company because of the laws of the country where the property is located. As a result, they 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.

Now, the new rules allow the property owners to claim exemption from the living accommodation tax charge outlined in the Income Tax (Earnings and Pensions) Act 2003 and to apply for a refund if they can show that they have paid such tax.

Qualifying conditions for exemption

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

• The company is wholly owned by the director or the director and others, 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, section 45(2) FA 2008 provides that sections 100A and 100B the Income Tax (Earnings and Pensions) Act 2003 are to be treated as always having had effect.

This means that where the provision of living accommodation overseas satisfies the statutory conditions, no liability to income tax in respect of the benefit of that provision arises for any tax year.

How to claim exemption and a tax refund

Anyone 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 giving the information below 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

Information to be provided:

• Name, address, National Insurance number and/or Unique Taxpayer’s Reference

• If agent acting – agent’s name and address

• Details of the living accommodation outside the UK – address, type of property, uses made of the property

• Details of the company through which living accommodation outside the UK is provided including name, address, nature of company/entity, place of incorporation, ownership and activities

• An explanation of why they consider that the exemption applies

• The years for which tax has been paid on the benefit of this accommodation

• Evidence that the benefit of the accommodation in question has been taxed – acceptable evidence would include for each year copies of one or more of the following documents which clearly show the benefit as taken into account as taxable income:

- Assessments/self-assessments

- P11Ds

- Tax coding notices

- Correspondence with HMRC