Sun, sea, sand and scepticism do not go together, so when looking at homes abroad it is even more important to retain the "buyer beware" attitude.
But Brits buying abroad often fail to take even the most basic precautions to prevent from their dreams turning into nightmares. Experts in this area recount tales of people signing documents that are not even in English, let alone bad translations from the original language, as well as not having proper valuations done before they submit a bid.
Some buyers fail to take into account UK tax on their purchase. And an obscure tax point has arisen which may adversely affect some of those who thought they were doing the right thing by buying their foreign property through a company to avoid inheritance tax liability in the country of purchase. By doing so, they are liable for tax on their use of the property as a benefit in kind, according to the Inland Revenue; they have to pay tax on it as if they were receiving a cash payment equal to the notional rent on the property.
The company structure most often used in France is the Société Civile Immobilière (SCI). The SCI shares, which are considered moveable property, are not subject to French inheritance law. Similar measures have been used in Portugal and Spain. But those countries, and France, have higher property taxes for people who own property in this manner.
Clive Mackintosh, head of the UK private client practice at PricewaterhouseCoopers, explained that this interpretation of tax law was highlighted in the House of Lords' October 2001 final judgement on "Dimsey & Allen", a criminal case. "Since the House of Lords decision, we have made very strong recommendations that clients must include it on their tax returns. If you do not declare it, then the Revenue will say there is a breach. We have been in touch with the Inland Revenue on this issue, but the Revenue was adamant that this interpretation is correct," said Mr Mackintosh.
The benefit in kind is calculated by reference to the time for which the property is available to the owner, whether the owner uses it or not (although periods when it is let can be ignored). The value is based upon the property's rental value, which could be as much as 8 per cent of the market value. A higher-rate taxpayer owning a property worth £150,000 would therefore have an additional tax liability of £4,800 a year.
Simon Conn, of the specialist mortgage broker Conti Financial Services, said some developers use tricks to get people to buy through companies. He claims that in Portugal many people were caught in that trap.
He said: "To the developers it was a quick way of getting the sale done. They will say that if you use a company to buy through, then we can get the finance in a month, otherwise you may be looking at five months." A spokesman for the Council of Mortgage Lenders said: "Lenders are not in a position to offer tax advice. It is not a lending matter.
"This is not a matter on which we have thought to give guidance to members."
John Woodhouse, deputy managing director and commercial director at Abbey National France, where purchases through companies are running at about 2 per cent of the total, said people should seek advice from an appropriate source, "usually the notary in France". But a French notary is hardly likely to be able to advise on UK tax liabilities, particularly one as obscure as this.
An Inland Revenue press officer, Patrick O'Brien, said: "There is no change in the law. The accountancy profession has just been looking for clarification of the existing law so they can be sure they're advising their clients correctly. We have agreed that we will issue some updated guidance. In the interim, we are happy to advise accountants and clients on a case-by-case basis on the facts of each case."
However, Keith Baker, principal at Croft Baker & Co solicitors, said: "In my view, this charge is prohibited by the terms of the double tax treaties with France. "Dimsey & Allen" does not provide the Inland Revenue with a blanket authority to impose taxation outside the UK.
"I would contend that the people who have bought through an SCI in France have not done so to defeat UK taxation. It is ludicrous to suggest that this is an attempt to defeat UK taxation. In reality, it is an attempt to avoid French taxation. I have a friend who bought a property, a ski chalet in France, using a company about 20 years ago. He obtained a letter from his tax inspector at the time, which stated that this arrangement did not give rise to a charge to income tax. He was then, and still is, UK domiciled for tax purposes."
Mr Mackintosh said his private clients are advised not to buy through a company, but if they do so there are means of mitigating the liability: "You can pay rent to the company yourself and there may be an agreement with a local agent to let it out for a number of weeks."
But Mr Baker said when buying in America he has been "strongly advised by US lawyers to get clients to purchase homes through corporations to ring-fence their other assets from litigious Americans."
FACT FILE: HOW TO BUY ABROAD
* Never sign a contract that you do not understand, such as in a foreign language.
* Seek specialist advice from independent solicitors, architects and surveyors.
* Ensure you do not inherit a debt on the property before you purchase, which a solicitor should be able to check.
* Always take a cooling-off period before a purchase. Don't put down a deposit there and then.
* When arranging finance on the property, ensure that any contract lets you opt out if the loan is not agreed, to ensure any deposit is refunded.
* Try to arrange your mortgage finance in principle, before agreeing to purchase the property, or before signing contracts and handing over a deposit.
* Arrange your mortgage in the currency you earn in, unless you are going to receive rental income in the local currency.
* Check with the estate agent or vendor that you are aware of the costs charged by the legal and government authorities.
* Open a bank account in your chosen country and get a certificate of importation for the money you bring in, to make repatriating your cash easier.
* Set up standing orders in a local bank account to meet bills and taxes. Failure to pay tax could lead to seizure of your property.Reuse content