If you receive income from abroad, or have assets abroad, then your liability to UK tax can be complex. However, if you are resident in the UK during a tax year then, subject to any double taxation relief that may be available, you will be liable to UK tax on all of your income or capital gains wherever it arose. This can come as a shock as many people think that they only need to account to the tax office on their UK income.
This could affect people receiving pensions for foreign companies, or receiving substantial foreign dividends or bank interest. However, one of the more common examples of when you may not properly calculate your tax liability is where you own a holiday home abroad.
If you let this property out then you will be liable to UK tax on any profits made, always remembering that expenses must be apportioned for any private use. Under these circumstances you must register for self-assessment and complete a tax return for each year during which income was received.
When the property is sold then you will need to complete the Capital Gains Tax pages of the tax return and account for UK Capital Gains Tax on any gain made, again subject to double taxation relief. HMRC have recently had a “campaign” to encourage people to ensure that they have properly reported any gains. Whilst the window to notify them within the campaign is now closed, HMRC emphasise that penalties will be substantially lower if people inform them of any gains before they are approached by the tax office.
If you think that you may be affected by any of the above then we would be pleased to advise you.