Many people lured by sun, sea and sangria are finding the
recession has turned their Spanish holiday dream sour.
A few poor unfortunates have even been left living in an
unfinished building site, in some cases with only the most basic
amenities.
But even those who can find a buyer and can return to the UK
could walk into another nightmare - an unforeseen UK tax bill.
That is the warning from Simon Littlejohns, tax partner in the
Birmingham office of PKF Accountants & business advisers.
And it is all down to the collapse of the pound against the
euro.
"The exchange rate has fallen off a cliff and people are finding
it too expensive to live in the Eurozone with the reduced buying
power of the pound," said Mr Littlejohns.
"But selling foreign investment or holiday properties can be
problematic."
One of the reasons is because any potential UK capital gains tax
liability will be calculated by reference to the property's value
in Sterling and not Euros.
"So, for example, you may have bought your Spanish holiday home
for 250,000 Euros and had to take a drop of 50,000 Euros to get rid
of it. But translated into Sterling and taking into account its
movement against the Euro you might find that the purchase price
was £170,000 and you have sold it for £185,000.
"You have taken a big hit at the Euro level and the loss means
you will not be liable for the Spanish version of capital gains
tax. However, you have made a £15,000 gain in UK terms and
that may leave you potentially exposed to paying UK capital gains
tax.
"Many people overlook the tax issues when retrenching to the
UK."
Mr Littlejohns went on: "My advice is to be very careful and
consider everything when selling a Spanish or French property.
"Make sure that you are aware of the local rules. Keep all
records and most important of all make sure that you are aware of
the UK tax rules."
In the UK an individual is exempt from the first £10,100
of capital gain per year; if the house is owned jointly by husband
and wife they each will have their own exempt amount. Thus, if the
property above is owned jointly there will be no UK tax as the gain
for each of them would be £7,500 which is less than the
exemption if this has not already been used against other capital
gains in the year.
Had the house been sold for a Euro profit then Spanish capital
gains tax might also have been in point with any such tax normally
available for double taxation relief in the UK.