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Original poster

Buying a holiday let

138 replies

slithytove · 30/07/2014 13:23

I don't know if this is in the right section, but I need some advice please.

My parents do not live in the uk. They have retired outwith the uk and visit for a couple of months a year.

They want to buy a place for them to stay in when they visit. However, they wish to rent it out as a holiday place when they are not here so it washes it's face. They would only need to let it for 2/3 months to achieve this.

They do not want any ties to the uk property wise.

Can they put the property in their grandsons name? What are the implications? Will this affect him if he one day wants to buy a house? He is an infant.

Can any income from the property be put in his name in the same way? They want to start building up a fund for him and thought this would be a good way to do it - as I understand he will avoid income tax under £10k?

What are the tax rules on a holiday let? Do they have to be declared if under the threshold? What makes it classed as a holiday let?

Any and all advice would be very welcome.

Thanks in advance.

OP posts:
Original poster
slithytove · 31/07/2014 15:46

It would be furnished to a high standard, the property in Spain is exquisite. I

don't think it would be an issue for holiday makers if there was no access to the garage or loft though, which is where my parents would be keeping their things. instead of clogging up my garage and loft

My parents wouldn't be in the country when it was rented out so access isn't an issue.

They are looking at £350k for a cottage up north.

OP posts:
Original poster
slithytove · 31/07/2014 15:48

Warm, have you found a way around the capital gains issue?

OP posts:
drspouse · 31/07/2014 15:57

The property would not be available for rent other than July and August. No matter the owner or the occupancy.

There will also be no records of when they stay there, as opposed to at mine, siblings or with friends.

Well, if you let through an agency, they will keep records of available periods and those booked by the owner, and they may be asked to provide these to HMRC.

I'm wondering if they should just buy YOU a holiday home that is never let out, and give you their stuff which you lend them.

You'd be liable for capital gains if you sold AIUI.

warmmeup · 31/07/2014 16:09

we haven't thought about it all yet- I thought capital gains only applies if you made a profit from a business- not as a 2nd home?
I do know we'd be liable for double council tax and depending on who wins the next election there is talk of them upping the tax on 2nd homes so it may not be something we do anyway- we'd do a buy to let in the commuter belt.

Original poster
slithytove · 31/07/2014 16:11

I wouldn't let through an agency, I would manage it for them and use holidaylettings.

The only available period for rent would be July and August. The rest would just be left unavailable, regardless of whether parents were there. Would I have to give a reason why? I don't with the Spain property.

I don't want them to put it in my name, I have my own property. What do you mean give me stuff which I lend them? I'm confused on that point.

OP posts:
Original poster
slithytove · 31/07/2014 16:13

I think capital gains is applicable as soon as you own more than one home.

OP posts:
warmmeup · 31/07/2014 16:18

yes you are right but there is an annual allowance of around £10K so it would only apply if the property increased a lot in value.

I think legal advice is the way to go if we ever did.

why would they not rent it out except for 8 weeks if they were not there? it seems odd because that way they would have some income.
you would also need to have it looked after- an empty house for 10 months of the year is a liability.

warmmeup · 31/07/2014 16:18

one extra point- the insurance on an almost- unoccupied house is likely to be huge.

drspouse · 31/07/2014 16:23

If they store their stuff in the house it could be construed as their house. If it's your stuff that you and they can use e.g. car in your name, then it's not their storage facility.

Original poster
slithytove · 31/07/2014 16:32

They would only rent it out, to cover the annual costs.

It would be near me so I could check on it. It would be empty about 7 months of the year but I take your point.

Ah I see regarding ownership of belongings, I thought you meant I should own my dads manky old winter wardrobe or my mums car that I can't drive!

Again though, are people really going to look into where my parents keep their uk holiday gear? As it stands, it's at mine but I assume it won't affect me or them legally?

OP posts:
warmmeup · 31/07/2014 16:38

It seems a bit of a daft idea to me.

If they are liable for capital gains, ( are they as non doms?), council tax, utility bills ( heating will need to be on over the winter some of the time), insurance, someone to clean between lets, the is 8 weeks' rental going to cover it?

Has anyone done the maths?

years ago we looked into buying a holiday let and English Country Cottages told us that ( then) the profit we could expect- an average- was around £12K a year, if it was rented out for so many weeks- mainly late April to early October and maybe a week at Xmas.

if your parents got say £600 a week for 8 weeks is that going to cover everything?

warmmeup · 31/07/2014 16:43

Just to compare costs- out of season I rented a lovely 2 bed holiday house for £1k a month- 3 loos and loads of space. I did a deal and got a 20% reduction on the basis that I was a long term let and would do most of my own cleaning. If they have £350K to spare then surely they could do that and rent a car when they come over? Buying a house to use off and on and using it to store an old banger doesn't seem to make sense unless they hope to gain some tax free profit long term from the property which is where we came in, I think!

Original poster
slithytove · 31/07/2014 16:54

8 weeks rental will cover council tax and bills yes. They would primarily use it in winter. Looking at a 3/4 bed cottage right now.

They don't want any profit whatsoever. Just don't want to have to pay out yet more to visit us in the uk.

They don't have £350k to spare, that is their budget for buying a property. They wouldn't want to swallow it up on something which won't appreciate.

As non doms they are liable for capital gains and are allowed to own one property, which they do already. Not worth selling it for a relatively small holiday investment.

I don't think they want to gain anything from it, just don't want to lose out by doing it either,

OP posts:
Original poster
slithytove · 31/07/2014 16:54

And the car is a vintage Porsche... Not an old banger

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Viviennemary · 31/07/2014 17:00

If it is used as a holiday home in the UK it will still be liable for Council Tax. I can't see how it would work if an infant was the registered owner of the property. I think you need to take legal advice on this.

warmmeup · 31/07/2014 17:06

so I was right, it IS an old banger Grin
I still don't get it- truly.

If they can afford £350K for a 2nd home they either have that as savings or will borrow it. There is no guarantee that the property will appreciate in value. Prices are now falling in the SE- the market has cooled. On top of that homes in the north are not selling quickly- we've been looking at some holiday homes and they are not shifting. so if they wanted to sell up any time that could be an issue. That's one factor that is holding us back- having income tied up in a house.

TBH if they have that kind of sum to play with, they'd be better investing it in stocks and shares- with advice- and using the gains to finance their trips to see you without all the hassle of a 2nd home.

warmmeup · 31/07/2014 17:06

Viv- you cannot own a home as an infant- see the other posts and the link- you have to be over 18.

AuntieStella · 31/07/2014 17:10

"They wouldn't want to swallow it up on something which won't appreciate. "

That utterly rules out buying in someone else's name then. It thy mak a gift, it has to be gift. They cannot get I back. So it would be 'swallowed up'. And as the trustees hav an obligation to the beneficiary to maximise return on a trust, they would need to pay proper rental fo the time they used it.

Otherwise HMRC could deem it not to be a gift and tax them to exactly th same level as if they had made the purchase themselves in the first place.

Viviennemary · 31/07/2014 17:10

Thanks. Sorry didn't read the thread. Blush

warmmeup · 31/07/2014 17:19

Are they very practical people? seriously? They are kind of my age and TBH I wouldn't hoard junk- either sell it, use it or store it- in their home country if necessary. But buying a 2nd home to store possessions that you are not using in your 50s seems a bit odd. And as i said before, they could invest that amount and it would long term easily cover a nice rental in the UK when they visited you.

wowfudge · 31/07/2014 17:50

OP - with the additional information you have now provided about their stuff, including a car(!), they have stored at your place, they should rent a secure lock up and also rent a place when they come over and have done with it.

I'd be hacked off with having someone else's car in my garage, etc., never mind the rest of it and would never have agreed to it. If they can raise those kinds of funds to buy somewhere they can damn well rent a storage unit and somewhere to live when they come over.

Original poster
slithytove · 31/07/2014 17:54

Yes, they would pay council tax of course, don't think I've indicated otherwise.

If it was happening, they would take legal advice. This is the very initial 'shall we do this" chat.

They have plenty of stocks and shares. They want a property in the north. Not to sell either.

They would prefer to have something potentially appreciating or at least retaining value to benefit their grand kids, rather than spunk it on rent which will never benefit their grand kids. I think that's a pretty fair distinction. They will not be renting in the uk.

I'm thinking that if they buy it, they just don't let it out. That seems like it would cover a fair few issues regarding income tax and letting, paying rental etc. Then there is just the issue of if they are legally allowed to visit, which I'm sure they will find a way around.

They don't hoard junk well I think it's junk they keep things here which they use when here. Their car, toiletries, their winter wardrobes (they live in a hot climate), they often get stuff delivered here to then take back home or to Spain, wine collection, my mum has a sewing machine here, etc etc. It would be pointless having it in their home country.

My mum especially is desperate to put down some roots in the uk, as legally as she can while remaining non dom. This is how she wants to do that. Whether it's possible remains to be seen. It doesn't look like it is right now.

OP posts:
joeandella · 31/07/2014 18:00

Get some paid advise. You are being cheap an trying to get tax and legal advise for free. This usually ends badly.

They are trying to avoid UK taxes using a elaborate scheme. Look at the new HMRC statutory residence test. This is new this year and clears up some areas - but the time they can spend in the UK is a lot less than it was. Again, get some advice. The SRT is a significant change.

They might also be caught out by 'having a property available in the UK'. Note - that's not 'own' just having a house to available.

As far as holiday homes, will you parents by visiting outside of school holidays? Most holiday homes tend to be let only during school holidays. If they are looking to stay 2 months in summer you might find that time eats into the ~20 weeks/year you'll let the place.

Oh, don't under-estimate how much time and effort maintaining a holiday takes. If you are letting one out never buy one more than 20 minutes away from where you live.

Original poster
slithytove · 31/07/2014 18:00

I don't disagree fudge!

It wouldn't be so bad if I could use the car, but it's a 2 seater old old thing, lovely etc but it's totally unsuitable for kids and I'm scared of the engine size! Such a waste of a gorgeous car.

OP posts:
joeandella · 31/07/2014 18:00

If your Mum wants roots then move back and pay tax. You cannot have it both ways.