Should you buy that overseas property you saw on holiday?

Investment in overseas property has long been regarded as something for the very wealthy. Over recent years, with the commuting times and costs to Europe and other destinations falling significantly, potential income and capital growth returns from overseas property investment are receiving much Press attention.

Given also the slowing of the investment market in the UK, there has been growing interest amongst many UK nationals not only is buying an overseas holiday home, but also in building property portfolios and, possibly, even a future place in the sun for retirement. We will leave the commercial/emotional issues to you, but thought it would be worth reminding you why considering tax issues and taking early advice is important.

The Basics

Whether you are just “dipping your toe in the water” for the first time, or are an established property investor, you should consider the key taxation concepts of which you need to be aware when contemplating property investment overseas:-

Residence/ordinary residence - What are the taxation implications?

Domicile - What are the taxation implications?

Income Tax - How do I manage paying taxes in two countries?

Capital Gains Tax - How are overseas properties treated?

Inheritance Tax - What are the implications of owning overseas properties?

Why do you need a Tax adviser if you are automatically going to pay tax and you know where your estate is going to end up when you die?!

We believe that the following typical questions illustrate that taking advice at an early stage can mitigate what might be assumed to be "automatic taxes".

• Can I change domicile and avoid UK income tax by keeping income overseas?
  
  
• Can I avoid tax by moving overseas?
  
  
• If I wish to move overseas, how long do I have to stay there to avoid being assessed for Capital Gains Tax on moving back to the UK?
  
  
• Can I claim a 10% “wear and tear allowance” on overseas furnished property?
  
  
• Where on my tax return do I put overseas rental income?
  
  
• If I have paid overseas tax but have no profit due to expenses/other reliefs in the UK, how can I get relief for this?
  
  
• Should I set up a limited company in the UK to hold my overseas property investment?
  
  
• Would setting up an off-shore company assist me in sheltering income from tax in the UK or avoid/delay UK Capital Gains Tax?
  
  
• If my overseas property is going to be solely for my private use, does this affect the exemption I currently have on my UK main residence from Capital Gains Tax?
  
  
• If there is a double tax treaty between the UK and the country in which I purchase property, what impact will this have on the general rules as to where Income and Gains are taxed?
  
  
• Should I own the property in my own name or have my spouse, who pays lower rates of tax, own it all?
  
  
• If I borrow money secured on my main residence to buy an overseas property, can I get tax relief on the interest against the rental income?

Our team at Nunn Hayward have years of experience in dealing with such questions and many more. If you talk to us at an early stage we can assist you by identifying the pitfalls and opportunities from your overseas property proposition. We can then help you to implement the most appropriate planning to suit your financial and personal needs for overseas property in the future.

If you have any questions or queries please contact Stephen Cook, Tax Partner at steve@nunn-hayward.com or on 01753 888211.

IT’S A GIFT!
DEADLINE 31 DECEMBER 2006

Did you know that if you sign up to Payroll Giving you can earn a £300 cash payment incentive from the Government.

Payroll Giving is one of the easiest methods of giving to charity, enabling employees to make charitable donations straight from their gross salary. It also gives them up to 40% tax relief on their donations.

Payroll Giving is quick and easy to set up and run and can make a real difference to your favourite charity. What’s more every donation given during the first six months of donations is matched pound for pound (up to £10 per month) for each person donating by the Government.

Nunn Hayward have implemented such a scheme using the services of Giving @ Work Ltd who handle the setting up process.

We estimate that once set up there is little/no extra cost added to the payroll run. The initial set up cost would also be minimal for small employers and would cost between £100-£200 for larger firms depending on how many employees wish to donate.

We believe that this has been a win win for the employees and our firm from a staff relation/motivation perspective and of course the nominated charities gain as well.

If you would like to set up a Payroll Giving Scheme please contact Suzanne Precious at Nunn Hayward for further information on 01753 888211 or email her at Suzanne@nunn-hayward.com

Please contact us to discuss the above further

Tel: 01753 888211 Fax: 01753 889669 Email: abacus@nunn-hayward.com
Nunn Hayward, Sterling House, 20 Station Road, Gerrards Cross, Bucks SL9 8EL.

© 2006 Nunn Hayward. All rights reserved