Tax treatment of timeshare

[Spet0789]

Hi all - slightly random question here.

My wife owns a fixed week in a timeshare property (please no comments on timeshare in general - this is a good one and we’re happy with it).

Just to pick some numbers, assume she paid 60 for a 20 year timeshare. She pays 1 per year in service charges. We rent the week for 5 this summer.

I assume this is taxable income for her… but how much? Is it 4 (5-1) or should she reflect the annual ‘depreciation’ of the upfront cost (so 5-1-3 = 1)?

Appreciate this is an obscure one. Many thanks in advance!

[genou]

Hi all - slightly random question here.

My wife owns a fixed week in a timeshare property (please no comments on timeshare in general - this is a good one and we’re happy with it).

Just to pick some numbers, assume she paid 60 for a 20 year timeshare. She pays 1 per year in service charges. We rent the week for 5 this summer.

I assume this is taxable income for her… but how much? Is it 4 (5-1) or should she reflect the annual ‘depreciation’ of the upfront cost (so 5-1-3 = 1)?

Appreciate this is an obscure one. Many thanks in advance!

The depreciation is a capital matter, and won't go against income; so the taxable income is 4.

[Spet0789]

Hi all - slightly random question here.

My wife owns a fixed week in a timeshare property (please no comments on timeshare in general - this is a good one and we’re happy with it).

Just to pick some numbers, assume she paid 60 for a 20 year timeshare. She pays 1 per year in service charges. We rent the week for 5 this summer.

I assume this is taxable income for her… but how much? Is it 4 (5-1) or should she reflect the annual ‘depreciation’ of the upfront cost (so 5-1-3 = 1)?

Appreciate this is an obscure one. Many thanks in advance!

The depreciation is a capital matter, and won't go against income; so the taxable income is 4.

Thanks. I guess you could interpret this as a pre-paid lease which perhaps confuses things. If the 3 is considered as capital, then could this be offset against otherwise taxable capital gains do you think?

[genou]

The depreciation is a capital matter, and won't go against income; so the taxable income is 4.

Thanks. I guess you could interpret this as a pre-paid lease which perhaps confuses things. If the 3 is considered as capital, then could this be offset against otherwise taxable capital gains do you think?

I'm not clear what your wife owns. A lease for less than 50 years is a wasting asset, so no CGT loss can arise. But she probably has a right to occupy; I suspect no loss can arise there either, but I'm not sure.

Even if it were able to give rise to an allowable loss, that would only happen when she sold it ( or gave it away to someone other than you ).

[Charlottesquare]

Presume income from UK located property , not overseas?

[Spet0789]

Presume income from UK located property , not overseas?

Yes, UK.

And to answer the other question, the structure here is that you pay an amount upfront and then have the right to stay at (or rent) a given property for a given calendar week for a given number of years.

[Charlottesquare]

Presume income from UK located property , not overseas?

Yes, UK.

And to answer the other question, the structure here is that you pay an amount upfront and then have the right to stay at (or rent) a given property for a given calendar week for a given number of years.

The million dollar question is whether the £60k paid is a premium on a lease under 50 years?

If it is the taxable amount on the landlord, and therefore tax relievable by the payer, is generally : P-(PxY)/50, where P is premium paid, Y number of years, less 1.

So effectively 60-(60x19)/50= £37.2k is revenue, spread over the term that is, on accruals basis ,£1,860 pa re deemed rent paid. Of course no idea if accounts re "rental" are being prepared on accruals basis or cash basis.

My main issue is no idea if right to use for one week a year for 20 years , with payment of £60k at outset, is covered by lease premium rules.

ITTOIA 2005 s277 re premium calc and see also ITTOIA s 281 re revenue relief for part of premium paid. (Please note I am a few years behind re all this and am using an older textbook)