Taxman trains his sights on Brits with a place in the sun

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If you have an overseas holiday home or second property that you rent out, the taxman could soon be turning his attention to your affairs.

An investigation by Revenue & Customs into Britons with bank accounts abroad has been launched as part of a wider drive against tax evasion and money laundering. Anyone with a separate overseas account linked to one in the UK is likely to have the details passed on to the taxman by the host British bank.

Some 257,000 UK residents have second homes abroad, according to government figures, and many will probably have foreign bank accounts in order to receive rent and cover local bills. The taxman wants to crack down on those who, unwittingly or not, fail to pay tax on income.

In May this year, the Revenue won a key ruling that forced Barclays to reveal the identities of all its UK customers with accounts abroad, to see if they have been complying with UK tax regulations.

It estimates that many have not.

The Revenue's best guess is that as many as a fifth of Barclays customers with offshore accounts may not be complying, and it expects to recoup up to £1.5bn as a result of the probe.

But there is nothing unusual about these customers and Barclays itself has done nothing wrong; other banks are expected to be subject to similar treatment in due course.

"There's no doubt that [the taxman] will proceed with identical applications in relation to all financial institutions in the UK," says Steve Besford, director of investigations at tax advisers Chiltern.

Accountants warn that many may be caught unawares. "As more people invest in property abroad, there may be a significant proportion who do not realise that assets in offshore accounts are liable to UK tax," says Charlie Hall, tax investigations partner at Grant Thornton.

"Anyone who receives rent or interest from an overseas property or investments will need to declare that income on their UK tax return."

Don't panic if you have an overseas account; the Revenue is not claiming that, just because of this, you are likely to be evading tax. Nevertheless, you should find out where you stand.

If you own a property abroad and simply have a local bank account in order to pay local rates and bills, you are unlikely to encounter problems - particularly if the interest paid on the account is very low. But to be safe, says Chiltern, you should write to the Revenue stating how much interest you earn each year. You may have to provide copies of your bank statements.

If, however, you receive rent from letting out your property, and the sums involved are rather larger, you should act now.

Melanie Bien, associate director at mortgage broker Savills Private Finance, says: "If you don't [declare income from rent or from the sale of an overseas property], you could end up paying substantial interest and penalties, as well as the tax owed."

So that you aren't taxed unfairly, she adds, ensure that you have all the paperwork to prove your assets have been acquired and maintained out of legitimate funds - "and that you declare income or profits".

Mr Besford says that some people could face a full investigation of their tax affairs. "Acting now to avoid the risk of prosecution is essential. By making a voluntary disclosure before Revenue & Customs obtains details of an account, individuals can minimise that risk."

The worst thing you could do is ignore the problem. Even if your bank is not being targeted by the Revenue at the moment, all banks within the European Union must now share information with tax authorities in other member states.