Tax break for foreign buyers
This has been delivered by the government scrapping UK tax on property bought through a company.
Assetz said holiday home owners often purchase property abroad through a company in order to avoid local inheritance laws, which makes them a director of the company owning shares in the home, which they can pass on as they wish upon death.
However, they have been subject to an annual tax in the UK as the property has been classed until now as a ‘benefit-in-kind’. This tax is based on the rental income that would have been achieved if the property was let at the local market rate. This charge is being scrapped from 2008, resulting in thousands of pounds of savings for the average international property owner who bought through a company. They will also be able to claim tax back retrospectively.
Martin Sadler, sales manager of Assetz International, commented: “This latest government u-turn is great news for property investors and holiday home owners overseas, who have until now been penalised by the UK tax system, even though buying through a company is often simply the only way to buy abroad.
“In France for example, many British people buy property through an SCI (Société Civile Immobiliere), which enables them to avoid French inheritance laws forcing the property to be sold upon death and divided between offspring. In some Eastern European destinations, it is only possible to buy property though a company if you are a non-resident.
“Individuals who have already bought could be in line to receive considerable payouts from the Inland Revenue next year, for any tax paid previously. The idea of buying homes overseas through a company will become even more popular following this u-turn.”
Assetz added investors will still be liable for tax on rental income if the property is let on the open market.