Investors turn to seaside to a find tax shelter

There is steady demand from the wealthy for seaside cottages. And the attraction is not the sea air, or walks on the beach, but the more down to earth matter of tax and finding a shelter before the January 31st deadline. Investors can benefit from tax relief for investing in specified seaside locations. The best reliefs are available on schemes which commenced before the 1997 budget restrictions the 1998 budget extended the scheme to mid-1999, with certain conditions.

There is a considerable tax advantage in year one, when half of the construction cost can be written off against tax. A house purchased for £100,000 might have a construction cost of £80,000 - allowing a £40,000 write-off in the first year. Thereafter the remaining cost can be written off at 5 per cent per annum over 10 years.

However, accountants caution that investors should undertake a full cash-flow analysis before investing as after the first year tax benefit they may find that the rental income does not cover the cost of borrowing to fund the purchase.