A home abroad without hassle
A foreign property is a dream for many people. Before you buy, read this advice.
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Your support makes all the difference.it doesn't seem so long ago that we took it for granted global warming was changing the British climate into a fair imitation of Gascony (if not quite Tuscany) and that all we had to do was buy a cottage in the country and wait for the grapes to grow.
Now that normal service has been resumed and the reservoirs are brimming full in August once again, dreams of owning a property abroad are being taken out and dusted down. But "don't be fooled into thinking that buying property abroad is a simple procedure," warns Andrew Snowdon, head of the international tax department at chartered accountants Kidsons Impey, who have produced a 10-point check list to consider before you buy:
1. If you are a UK resident any rental income from property abroad will be subject to UK income tax and should be disclosed on your tax return.
2. If the property is your principal private residence there is no liability to income tax or capital gains tax, provided you have never let it out for rent.
3. If you decide to resell in future, you may be liable for CGT on any profit.
4. The property could well form part of your estate when you die and if it takes you over the current threshold of pounds 223,000 it will be taxed at 40p in the pound.
5. Find out what local income and capital gains taxes apply.
6. Local inheritance laws may work differently to the UK. Consider making a separate will in the country in question, but do take professional advice to ensure that one will does not revoke the other.
7. You could put the ownership in trust with the title resting outside the UK or even in a third country. But many countries reserve the right to tax foreign-owned properties, and double taxation agreements apply to dividends but not to rental income.
8. You could set up a company to buy the property but it has to be managed and controlled outside the UK to escape UK corporation tax.
9. If you borrow to buy the property you could get tax relief on interest to offset rental income, but you may have to deduct UK withholding tax from interest paid to overseas lenders.
10. Don't be discouraged, but if in doubt, take professional advice.
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