Foreign land and property income

Produced by Tolley
Foreign land and property income

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Foreign land and property income
  • Interaction with overseas taxes
  • Treaty provisions
  • Let property other than furnished holiday lets
  • A separate property business
  • Not a trade
  • Losses
  • What expenses can be claimed?
  • Capital allowances
  • Owning a holiday home through a company
  • More...

This guidance note covers, in outline, the UK tax consequences of deriving income from land or property overseas.

It looks at the interaction with overseas taxes, and considers the UK tax treatment of let property, overseas farms, woodlands, and the use of companies to hold foreign holiday property. Furnished holiday lets situated abroad are covered in the Furnished holiday lets guidance note. This guidance note does not cover capital gains, VAT or inheritance tax, except incidentally.

For more on capital gains tax, see the Land and Leases guidance notes.

Property held in trust is outside the scope of this guidance note. For information on this, see Simon’s Taxes I5.12. This guidance note also does not extend to remittance users, see the Remittance basis ― overview guidance note for more detail.

Hotels and guesthouses are treated as foreign businesses, see the Setting up overseas ― sole traders and partners and Introduction to setting up overseas ― companies guidance notes for some of the issues to consider when setting up a foreign business.

Interaction with overseas taxes

Income from farms, woodland or let property outside the UK is almost invariably subject to tax in the overseas country. Comprehensive advice on the foreign tax implications is essential, and this is best obtained before the individual begins the overseas venture.

In particular, the individual should be aware of the tax residence rules in the foreign country, so they does not accidentally become taxable there on their worldwide earnings, rather than simply on their foreign property profits.

Treaty provisions

You should check to see if there is a double tax treaty between the overseas country and the UK, and look for the Article covering land, usually categorised as ‘Immoveable Property’. Generally speaking, the country in which the land is situated is regarded as having primary taxing rights, so the individual will need to claim double tax relief against their UK tax on the overseas property. If there is no treaty, the individual can claim unilateral relief.

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