Avoiding the little black rain cloud when buying a property in the sun

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Whether for own use and pleasure, or purely as an investment opportunity, interest in the ownership of overseas property is at an all time high.

Many may be seasoned investors with a number of properties in their portfolio, but for others the purchase may be a one off. In any event, experience shows that all too often the purchase can be emotive and the chance of owning that dream property in the sun could soon be clouded by not knowing some of the pitfalls. Location and ownership aside, there are a number of myths where belief in them could prove to be costly.

Myth: Rental profits are not taxable in the UK

True Position - yes they are if you are UK tax resident.

Myth: Rental Profits are only taxable in the UK if profits are remitted to the UK

True Position - taxable whether or not you remit the profits back to the UK unless you are non-UK domiciled.

Myth: If I pay tax overseas I do not have to declare profits in the UK

True Position - you must declare profits on your UK Tax Return but you will get relief for any overseas tax paid.

Myth: Capital Gains are not taxable in the UK

True Position - Yes they are if you are a UK resident (or ordinarily resident). Applies even if you have to pay tax on the gain overseas, subject to Double Tax Relief. Applies whether or not you remit proceeds to UK unless you are non-UK domiciled.

Undoubtedly the purchase of a property overseas has significant tax implications, both back in the UK and in the country you decide to buy. To avoid a nightmare purchase or the potential to face an unexpected financial loss, it is strongly recommended that tax planning advice is sought prior to purchase and that you consider the tax regime both in the country of your choice and in the UK.

For more information please email tax@streetsweb.co.uk