Buying property
8. Are there any other taxes that a foreign national needs to consider when buying assets/property in the UK? For example:
- Purchase and gift taxes.
- Annual rates.
- Wealth taxes that apply to foreign nationals with assets above a certain value in the UK.
Stamp duty land tax (SDLT) arises on the purchase of UK land and property at the following rates:
- 1% on values between £175,000 and £250,000.
- 3% on values between £250,000 and £500,000.
- 4% on values above £500,000.
SDLT does not generally apply to gifts of land or property.
Stamp duty is payable at 0.5% on the price paid for shares in UK companies. It does not apply to gifts of shares.
There is no annual wealth tax, although council tax on residential property and business rates on commercial property are payable annually. They broadly reflect the value of the property. They are paid to the local authority and are not strictly taxes.
Value added tax (VAT) at 15% arises on the purchase of most goods and services. In some cases, lower rates and exemptions apply. VAT does not apply to residential property.
9. What property holding structures are available in the UK?
An individual can hold property:
- Personally (for personal occupation or investment purposes). If the property is the individual's main residence, relief from CGT is available.
- Jointly with others. If the property is the individual's main residence, relief from CGT is available.
- Through a company. If the company is offshore, its shares are non-UK assets owned by the individual. If the individual sells the shares in the offshore company at a gain and meets the following criteria, he can benefit from the remittance basis (see Question 2):
- he is UK resident;
- he is foreign domiciled.
If the shareholder is not UK domiciled, his shares in an offshore company are exempt from IHT, although he may be liable for ICT if he lives in the property.
- Through a trust. If the individual occupies the property under the terms of the trust, and it is his main residence, relief from CGT is available.
- Through a combined trust and company structure, where the trust holds the shares in the company and the company holds the property. If the trust and the company are both offshore:
- there are possible CGT advantages;
- there is additional IHT protection, as no IHT is due on shares in an offshore company, even if the settlor becomes domiciled or deemed domiciled in the UK.
However, the individual can be liable for ICT if he lives in the property.