People who own a holiday home in Europe and have made a loss on renting out the property, could be eligible for a tax rebate — but the advice is to act fast, as claims must be made by July 31.

Furnished holiday lettings (FHL) relief allows owners of holiday homes to offset against their income expenses that qualify for capital allowances, that is, the value of fixtures and fittings as well as equipment such as refrigerators and washing machines.

Until the last budget, this was only available to people with holiday homes in the UK. However, this was deemed to be in breach of EU law, so FHL relief has now been extended to those with properties in Europe.

"If your property qualifies, you could be due a tax repayment, which in today’s economic climate would be very welcome,” Leonie Kerswill, tax partner at PricewaterhouseCoopers, said.

Graeme Lovell, tax director of chartered accounts firm Langdowns DFK, said: The value of this relief can be very significant. If you have a property worth £150,000 and a third of that qualifies for capital allowances, you could make a claim of more than £50,000.”

Losses do not have to be set against rental income from the property, but can be offset against general earnings, including a salary or profits from self-employment.

The window of opportunity to take advantage of the tax break is narrow as the Government plans to withdraw FHL relief altogether from April 2010.

In order to qualify, your holiday home must be within the European Economic Area (the 27 EU member states plus Iceland, Lichtenstein and Norway). It must be let furnished for at least 70 days during the tax year in which the claim is being made (in this case, 2006/7), and it must have been available for letting for at least 140 days. It should not normally be occupied by any one tenant for more than 31 days at a time.

In order to claim the relief, you need to submit a self assessment form to HM Revenue and Customs or make an amendment to your self-assessment form if you have already submitted one.

“You need to make a claim for the 2006/07 tax year by July 31,” Lovell said, “but that does not mean that the expenses need to have been incurred during that tax year. The property could have been purchased ten or 20 years ago, but this will be the first year in which you are able to claim capital allowances."

www.langdowns.co.uk