Foreign land and property income

Produced by Tolley

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...

Foreign land and property income

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

It looks at theinteraction with overseas taxes, and considers theUK tax treatment of let property, overseas farms, woodlands, and theuse of companies to hold foreign holiday property. Furnished holiday lets situated abroad are covered in theFurnished 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 theLand and Leases guidance notes.

Property held in trust is outside thescope 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 theRemittance basis ― overview guidance note for more detail.

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

Interaction with overseas taxes

Income from farms, woodland or let property outside theUK is almost invariably subject to tax in theoverseas country. Comprehensive advice on theforeign tax implications is essential, and this is best obtained before theindividual begins theoverseas venture.

In particular, theindividual should be aware of thetax residence rules in theforeign 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 theoverseas country and theUK, and look for theArticle covering land, usually categorised as ‘Immoveable Property’. Generally speaking, thecountry in which theland is situated is regarded as having primary taxing rights, so theindividual will need to claim double tax relief against their UK tax on theoverseas property. If there is no treaty, theindividual can claim

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