Restrict Non Residents’ UK Property Purchases?

by Readers Question

10:24 AM, 14th December 2017
About 9 months ago

Restrict Non Residents’ UK Property Purchases?

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Restrict Non Residents’ UK Property Purchases?

I read an article yesterday where an MP suggested restricting the number of properties that are available for non UK residents to purchase. The idea being that if wealthy foreigners didn’t buy the properties then they would be available for UK residents and hence the housing shortage would be lessened.

This got me thinking – but what if a non resident, was still keen to buy UK properties. How would they go about organising it? I came up with an idea in terms of UK taxes, but ignoring non UK taxes. Would you please tell me what I’ve missed out? What pot holes can I not see please?

Let’s say, I open a UK limited company, inject £50k and then buy a property for maximum £100k. As I am purchasing as a UK resident (corporate), I am liable to corporation tax on any profits, but my mortgage and many other expenses are tax deductible. As this is my first purchase, I pay the lowest level of stamp duty. I could buy multiple properties, each in their own UK limited company. I would pay yearly accounting costs for the running of the company/companies.

Now let’s say that I wish to sell and the property is valued at £200k. As the limited company is only to hold the property, I sell the shares in the company. As I am non UK resident, I do not pay CGT on the gain on the shares. As the sale is shares, there is no stamp duty. So the only taxes to pay would be any local/non UK taxes. Correct?

Now let’s say that instead of selling the shares, I give them to my children. Again, as the gift is shares, there is no IHT, no CGT, and no stamp duty. So the only taxes to pay would be any local / non UK taxes. Correct?

Setting up a UK limited company is simple, but would it need a specialist set of Articles or Memorandum?

If your turnover was above the VAT threshold, you’d need to account for VAT.

If the local tax system demands a yearly valuation of company shares, this could be challenging. Perhaps you would need to have a professional valuation every 5 to 10 years.

Simply put : buy each property in a separate UK limited company and if you want to sell/gift, do so to the shares.

So what are the other problems with this idea?

Sam



Comments

Mark Alexander

11:29 AM, 14th December 2017
About 9 months ago

Hi Sam

You have misinterpreted lots of tax legislation but I will focus only on your misunderstanding in regards to Stamp Duty for now as I don't have a lot of time.

First, Limited Companies always pay the extra 3% SDLT rate for property purchases over £40,000.

Second, there is Stamp Duty payable on the transfer of shares, albeit only 0.5%. The vendor never pays Stamp Duty, the purchaser does.

I will come back to your comments on IHT, CGT etc. when I have more free time.

Gromit

11:34 AM, 14th December 2017
About 9 months ago

There is also the possibility of ATED to consider, if a property doesn't have an exemption.

Michael Holmes

15:25 PM, 14th December 2017
About 9 months ago

I would hate to be your accountant to try and sort all that out! Your costs would far outweigh any benefit from the tax avoidance I should think.

Kate Mellor

23:48 PM, 24th December 2017
About 9 months ago

More potholes than road I’m afraid Sam...Folllwing on from what Mark said, a further point is that IHT IS payable on non-trading company shares & property is not VATable as a general rule.


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