UK holiday home threat

Britons with holiday homes abroad face a new tax even if they do not rent out or visit their property.

Hundreds of thousands of people who own a holiday home through a company structure could be liable to pay the tax.

Many people with property in France, Spain, Portugal and elsewhere own it via a company set up to avert local inheritance and tax laws. But two recent court decisions mean owners of such homes could be regarded as receiving benefits in kind from the company and be liable for tax.

The tax treatment is being reviewed by the Inland Revenue, which said yesterday it would be issuing updated guidance. A decision could be taken in time for next week's budget.

About 500,000 Britons are thought to own holiday homes in France and a similar number in Spain. Many do so through a company structure. In France it is often via a societe civile immobiliere, usually set up to avoid rigid French inheritance laws.

A higher-rate taxpayer owning a £150,000 property could face a tax bill of £4,000 based on a notional rental value of 7 per cent of the market value.