Foreign land and property income

By Tolley

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

  • Foreign land and property income
  • Interaction with overseas taxes
  • Let property other than furnished holiday lets
  • Owning a holiday home through a company
  • Farming
  • Woodlands
  • Reporting

This 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 Division C4.4 (subscription sensitive). 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 Setting up overseas - companies guidance notes for some of the issues to consider when setting up a foreign business (both subscription sensitive).

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, he should be aware of the tax residence rules in the foreign country, so he does not accidentally become taxable there on his worldwide earnings, rather than simply on his 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

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