Those investing abroad have the tendency of getting caught up in the many legal formalities. What should be exciting when you finally are buying a holiday property is defeated somewhat when while going through the formalities investing abroad in your property neglects how any income and capital gains will be taxed.
Were you aware that UK’s tax treatment depends mostly on the tax status of the person investing? Let us look at the UK tax implications for various potential purchasers.
UK Resident or Ordinary Resident and Domiciled:
• Any gains or income arising from the property will firstly be subject to UK income tax and capital gains tax
• Additionally, the property will be integrated within your estate for IHT (inheritance tax) purposes
Non-Resident or Ordinarily Resident and Non-UK Domiciled:
• Any income gains from investing abroad as a non-resident will NOT be legally responsible to UK taxes
• Additionally, the property would not be included within the individual’s estate IHT purposes
• If you fall into the category of Non-Resident or Ordinarily Resident and Non-UK Domiciled individual then you have numerous advantages which you can gain on. You can easily plan your UK tax affairs. This is simply because these individuals are known as foreign nationals, which means they are usually born overseas and who have come to the UK to live for a number of years
• ‘Remittance Basis’ applies for such individuals in relation to the tax and capital gains; this is the key advantage. All this implies that any rental income obtained from the investment property abroad exempts one from UK taxes but only if the income is not remitted to the UK
• Additionally, on future disposals, no UK capital gains tax would be charged, but only if the proceeds from the investment abroad are kept overseas. If we look at this from a UK tax perspective, it is clear that there would be no UK inheritance tax impact
• Synchronously, being a non-UK domiciliary, the estate would only include UK assets
Just for your information, if you are subjected to suffering from a tax conscience, perhaps you should read the following to relieve the symptoms:
A staggering £3,000,000,000 is the amount that fraud and administrative errors are costing the Government each year from the welfare budget, according to the National Audit Office…
The actual cost of collecting tax and national insurance has risen by £100m in 2004, which has increased much more since, this is nearly three times the rate of inflation. The Government’s total bill for tax collection came to £2.4 billion …
‘The avoidance of taxes is the only intellectual pursuit that still carries any reward’ … John Maynard Keynes