With the holiday season almost upon us, bach owners might want to study up about the relevant changes to the rather bizarrely-named Taxation (Livestock Valuation, Assets Expenditure and Remedial Matters) Act that came into force on 17 July 2013.
This legislation tightens the rules around deducting expenses related to assets that are used privately by the owner and also used to earn income. Holiday homes, boats, yachts and aircraft – mixed use assets – all come under this IRD net.
Simply put, under the new legislation expenses relating to both private and paid use of the asset (such as rates and electricity) will be apportioned using a new formula. There’s an additional requirement that owners need to earn at least 2% of the property’s Rateable Value in any given tax year if they want to claim expenses in excess of income derived from the asset.
This legislation applied to bach owners from 17 July 2013. Owners of other mixed use assets such as aircraft, boats and yachts have a reprieve until the tax year ending 31 March 2015.