Overseas property businesses

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Overseas property businesses
  • Overview
  • Foreign property income
  • CGT planning

Overview

The purchase of a property abroad will always be complex as at least two different jurisdictions’ laws will need to be dealt with when considering the tax aspects. For this reason, it will always be important to take expert local advice on the local tax position, as well as considering the UK tax position.

In principle, in the event of any rental income being received from a holiday home abroad, or in the event of a later capital gain being realised on the disposal, the income or gains are usually taxed locally. That is not to say that the UK will forego its rights to tax the foreign income or gains.

The UK remains able to tax the worldwide income and gains of individuals resident in the UK. This applies even to jurisdictions with which the UK has a double taxation treaty, although, it is always necessary to consult the individual treaty. A list of double tax treaties can be found on the GOV.UK website . See also Simon’s Taxes F1.3 (subscription sensitive).

In general, a treaty would only provide which country has the priority of taxing rights (and this will normally be the country in which the immovable property is situated), but does not prevent the UK from taxing that same gain in accordance with the UK’s own laws. The UK will, however, provide a credit against the UK tax charge for a foreign income or CGT charge as appropriate. Such credit would be given either unilaterally or by virtue of a relevant treaty the UK may have with the jurisdiction concerned.

Details of how to claim the relief are given on the foreign notes to the tax return and in Helpsheet HS263 .

Foreign property income
Basis of taxation

An overseas property business is charged to income tax on persons

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