Owning a second holiday property abroad often means friends, family and work colleagues will probably ask to rent the property from you for a week or so, but ACCA has warned that a friendly, 'mates rates' rental could be classed as taxable income.

Chas Roy-Chowdhury, Head of Tax at ACCA, said: “However much you charge, the rental you ask for will be seen by both the overseas and UK taxmen as taxable income. And the tax authority in the country where a holiday home is based will probably have first claim on this tax charge. So, the friendly, seemingly goodwill gesture of offering your place in the sun to friends and family at a discount rate can be costly if you don’t let the taxman know what you’re doing.”

As an example, if you rent out your holiday home in Spain, income tax will be charged on that rental income both in Spain and in the UK. But this is dependent on the tax rate in the country where the holiday home is based. That country’s tax authority will have first claim on the tax charge, and then the UK’s Revenue and Customs will probably claim an additional amount if you have paid below UK rates of tax.

Chas Roy-Chowdhury said: “It is important to declare your rental income, both at home and abroad. It is also advisable to check whether a double taxation treaty exists between countries – in some instances the UK has an agreement which ensures you only pay the tax in the country where the property is located. And ACCA also advises that if you have a property abroad, ensure it is included in your will. And if you don’t have a will yet, get one drawn up as soon as possible.”

Roy-Chowdhury concluded: “Keeping simple records of your ad-hoc rentals is also a good idea, such as how much was charged, the length of the rental and the names and addresses of people who will be staying in the property. Not only will this help with any insurance claims, but will also help should the taxman want more details. In addition be careful where you buy the property as some countries such as France have a Wealth Tax which will subject your property to an occasional tax charge purely because you own it.”