HMRC Scraps Tax on Overseas Property

The British Government has delivered a considerable tax bonus for British people owning property overseas for private use, by scrapping UK tax on property bought through a company.

Holiday home owners often purchase a property abroad through a company in order to avoid local inheritance laws. This makes them a Director of the company owning shares in the home, which they can pass on as they wish upon death free of local death taxes – but still potentially liable to UK inheritance tax.

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.

Matin Sadler, Sales Manager of Assetz International, said: “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 (Societe Civile Immonbiliere), 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 through a company if you are a non-resident.”

According to Assetz, 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.”