Most of us know someone who owns a holiday home abroad. If you buy a holiday home, it is not unusual to do so with an eye on renting it out during periods when it's not being used by the family.
A good idea? Perhaps, but you'll also need to keep an eye on the tax rules. Kerry Hilliard of Stephenson Smart Chartered Accountants gives the following advice.
Generally, if you are a UK resident for tax purposes, you are liable to UK tax on your worldwide income and this includes rental income and gains from the disposal of property overseas. This topic is very much on H M Revenue & Custom's (HMRC) radar following an initiative that started in 2016.
Legislation called the 'Requirement to Correct' was introduced obliging taxpayers to correct their record by reporting any previously undisclosed foreign income and gains to HMRC by 30 September 2018. Those that fail to correct their tax position will be subject to a tougher penalty regime from 1 October 2018. The requirement to report foreign income and gains includes much more than unreported rents and gains on holiday homes.
Many people do not realise that straightforward transactions such as receiving income from an offshore bank account could trigger a reportable UK tax liability. For this purpose 'offshore' includes the Channel Islands, Isle of Man and the Republic of Ireland.