Taxes Consolidation Act 1997 section 405

Restriction on use of capital allowances on holiday cottages

Section 405 restricts the ways in which capital allowances on holiday cottages may be used to shelter income or generate tax relief.

• Capital allowances on holiday cottages incurred on or after 24 April 1992 cannot be used to generate a tax refund, shelter non-trading income, create or augment a trading loss, or be claimed as group relief — they can only reduce trading income from the holiday cottage itself, with any unused balance carried forward.
• The restrictions do not apply to expenditure incurred before 6 April 1993 where, before 24 April 1992, either a binding written contract for construction of the cottage had been entered into, or both a binding written contract for the purchase or lease of land had been entered into and a planning application had been lodged with the planning authority.
• A further exemption applies to holiday cottages first registered on or after 6 April 2001 in the National Tourism Development Authority's register, provided the cottage previously qualified as a resort area premises under section 353 and its allowances were not ring-fenced under section 355(4).
• The restrictions only bite on losses that would not have arisen but for the holiday cottage allowances — if a loss would have arisen in any event, that portion is unaffected and may still be relieved in the normal way.