Overseas holiday homes purchased through a limited company
Taxpayers who purchased overseas holiday homes through a limited company have an opportunity to claim a refund of Class 1A national insurance contributions (NICs) paid in respect of foreign holiday homes. Many taxpayers buy foreign holiday homes through a limited company. In many countries it is a legal requirement to make such a purchase using a limited company. Prior to Finance Act 2008, the establishment of a limited company sometimes gave rise to an income tax charge for certain overseas holiday homes.
The Finance Act 2008 introduced new provisions that effectively provide an exemption 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.
At that time HMRC advised that refunds of tax could be claimed on the basis that the living accommodation tax charge was never intended to apply in these circumstances and many taxpayers in this situation were able to claim a refund of tax.
However this did not apply to Class 1A employer NICs. HMRC have now published Regulations that align the national insurance contributions’ position with that for income tax. This means that it is now possible to claim a refund of Class 1A national insurance contributions for any year before 2008-09 on the benefit of living accommodation which qualifies for exemption. The deadline for applying for a refund of overpaid national insurance contributions must be made in writing on or before 6 April 2015.