By Alan Turner, Forth Capital
There are two major changes to UK taxes that will happen in April that are going to significantly affect UK property owners who live abroad.
The first of these is going to see an increase in the stamp duty that is paid by expatriates acquiring a second UK residential property, and the second change is an increase that will affect expats who own UK properties within companies.
I took the time to discuss these with our Head of Tax, Mark Routen, to try and understand what this really means and what can be done to mitigate. This is what I learned:
Stamp Duty Increase
The UK Government will increase by 3% the stamp duty that expats pay when they buy a second UK residential property and at present stamp duty can be as high as 12% if a property is purchased for a value of 1.5m GBP or more.
Where possible, the simple advice is to complete any pending purchase before April 1st, then the extra charge cannot apply. The extra charge will also not apply if the property being bought is the only UK property that the person owns. So if they were to sell their existing property and then buy a new property as an investment the 3% charge would not be applied.
If you already own one or more UK properties when buying something additional then you WILL be subject to the extra 3 per cent. Married couples are treated as one, so any purchase will attract the 3 per cent charge if the couple are then owning two or more properties.
It is possible to invest in UK property and purchase in the name of other family members. If you are non-res and non-dom you are able to make cash gifts to any children or grandchildren without any UK tax arising. The purchase can then be made by the recipient (assuming it is their one and only property) without the 3 per cent rate applying. If you are UK domicile then such cash gifts do not cause any UK IHT issue as long as they live for seven years afterwards.
For non-dom expats an option is to create a trust for the family member and for that trust to then make the purchase. Providing any trust is set up for the main benefit of just one beneficiary (and again it is their only UK property) then the 3% won’t apply. A trust can be structured so that it is not subject to UK IHT on the beneficiary’s death.
Tax on Properties within Companies
Often referred to as ‘Enveloped Dwellings’, this annual tax will basically become a mansion tax that will be payable by companies that own non-rented UK property. So if you are an expat who holds a UK property in a company, then this may well affect you. When created this tax charge only applied to properties valued over 2m GBP but from April it will apply to anything worth over 500k GBP.
However, if your property is rented out to a non-family member then relief is applied, but this does involve filing a return and has to be done in a hurry so ultimately the best action is seemingly to remove the property from the company ownership.
If anyone has any questions on any of this, then please contact us right away and Mark, the head of our tax advice office in the UK, or one of the advisory team will be happy to discuss your concerns. Mark spent many years working for HMRC themselves before starting to deal with private client tax planning issues and is a sage-like source of expertise in this regard.
Author's bio
Alan entered the international financial services sector when he relocated to Frankfurt in 2005 to take up an advisory support role. After 18 months in that role, Alan joined Forth Capital in Geneva during its launch phase to provide the existing advisory team with marketing and business development support. Alan was integral to the growth of the company in Geneva and later in the identification of potential new global markets.
After a short spell away from Forth Capital, spent launching a start-up marketing consultancy in the UK, Alan took on the global role of Business Development Director at the start of 2014. He now heads up the global sales and marketing function across all of Forth Capital’s branches, growing a team to support the company’s increasingly rapid growth.
Alan’s team facilitate the link between our advisers and our clients, handling enquiries and making every effort to ensure that those seeking advice are connected with the most appropriate member of our team to advise them on their specific financial planning requirements.
Now based in the Dubai office, Alan strives to bring Forth Capital’s high quality financial services offering to expatriates across the world through effective professional marketing channels and promotional work.
