International investors looking to purchase property in the UK have many tax considerations to make.
The taxation of property in the UK is complicated; overseas investors must consider the application of the Annual Tax on Enveloped Dwellings (“ATED”), Stamp Duty Land Tax, Non-Resident Capital Gains Tax (“NRCGT”) and Inheritance Tax (“IHT”). International investors who intend to let UK properties must also consider the Non-Resident Landlord Scheme where rental profits are taxed under either the income tax or corporation tax regimes.
Annual Tax on Enveloped Dwellings – ATED
The ATED charge levies an annual tax on certain properties where a company has an interest in its ownership. This tax can often apply to properties used by families privately which are owned by companies – careful consideration is needed of how privately used property should be owned as the ATED charge on high value properties can be very significant.
Non-Resident Capital Gains Tax – NRCGT
The scope of NRCGT now applies to non-UK residents that dispose of interests in UK residential or commercial properties or UK land. Additionally, the charge to NRCGT applies to both direct and indirect disposals of a UK asset, for example, an NRCGT charge could also apply on the disposal of shares in a company that owns UK property. A further difficulty with NRCGT is that the relevant date which is to be considered for base costs of assets varies depending on the type of asset being sold. The tax returns for NRCGT transactions must be filed within 30 days of the disposal and therefore valuations and advice should be obtained prior to the disposal taking place.
Inheritance Tax – IHT
A key issue for investors can be the longer-term plans for the property assets and their status for UK IHT. We work with our clients to develop long term strategies for succession planning.
Stamp Duty Land Tax (SDLT)
Stamp Duty Land Tax (SDLT) is payable on the purchase of property in the UK with a value above the appropriate threshold. From 1 April 2021 a surcharge of 2% was introduced for the purchase of UK residential property by non-UK resident buyers. Where there is more than one buyer, the surcharge applies if at least one of them is non-UK resident. This surcharge is applied to the purchase of all residential properties, both freehold and leasehold, or on lease premiums above £40,000. It can also apply if a purchase includes both residential and non-residential property.
Overseas buyers should also be aware that a separate surcharge of 3% applies if an individual buyer already has an interest in residential property anywhere in the world, not just the UK. The 3% surcharge also applies to purchases by companies and trusts.
Our team of experienced tax advisers can help investors decide the most suitable and tax-efficient way in which to purchase the UK property and ensure that all relevant taxes are reported and paid in time to avoid potentially significant penalties.
If you would like to speak to us about our bespoke tax advisory services, on a free and confidential basis, please contact us.