Investing in UK property: The new tax relief for non-doms
A new tax relief is being introduced in April and is good news for non-doms thinking of investing in UK property. It also offers excellent opportunities for UK developers and investors seeking finance from new sources.
Until now, most non-doms with significant offshore income or gains would never bring that money into the UK as they would face a tax charge of up to 50%. The Government recognises that the British economy is losing out and has therefore introduced Business Investment Relief. This is a new tax break for non-doms, which will allow them to bring their foreign income or capital gains into the UK tax-free if they invest in UK business. This can include UK property.
The investment in UK property must be made through a company. The relief applies to both investment in and development of commercial property. It also covers residential property provided the company does not carry out a substantial amount of non-qualifying activity (which broadly means pure letting). Companies building and developing residential property will be eligible, as will trading companies where the business involves the use of residential property, such as nursing homes, private hospitals, hotels and student halls of residence. However, simple letting of residential property will not qualify unless this forms less than 20% of the company’s business activity.
In our view, this tax relief is both flexible and very generous. There is no upper limit on the amount of relief available to a non-dom and nor is there any restriction on the size of his shareholding or his ability to work for the company. Although there are fairly strict rules that need to be satisfied, with the right advice these should not be a deterrent. We therefore expect the relief to be widely welcomed by those non-doms with substantial offshore income and gains who are interested in investing in UK property.
The relief also provides an excellent new source of investment for UK property developers and investors seeking finance. We hope to be able to use our extensive contacts in the non-dom and property worlds to match up potential non-dom investors with property companies seeking finance.
For further information please contact Andrew Goldstone or Daniel Lipman