UK Fact-File Part 7:
Business Owner Welfare and Lifestyle

7.9 UK International Real Estate

International real estate and its tax treatment

Acquiring accommodation in another country requires careful consideration. A property can be purchased before moving abroad, either a resale or ‘off-plan’ property (new), but attempting to do this solely from the UK is not a good idea. Much research can be carried out online via the numerous websites that sell properties (eg Spain, France). The real research will be visiting the area where one intends to settle and finding out as much as possible about the locale, residents, services and communications.

Using the services of a reputable lawyer is essential, especially one who can speak the language of the destination country and who is conversant with the property laws of that country. Property developers and agents should be checked out, and money should never be handed over without the proper legal documentation being prepared and signed.

The tax treatment of an international property transaction (either purchase or sale) will also vary according to whether the property is purchased by the individual privately, or via a corporate structure (although this can present its own problems, as some countries object to this).

Where taxes do apply to international property purchases, they are likely to include:

• Purchase, acquisition or transfer taxes on the property or land, (such as inheritance tax, stamp duty and property transfer tax);
• Ownership and/or residence taxes relating to the property (including local and national property taxes, and land tax);
• If the overseas property is rented out, be aware that such ‘passive’ income may also attract a charge)

One possible approach to moving to another country is to rent a property (short-term, or long-term). That allows the move abroad to go ahead relatively smoothly, though checks should still be carried out in much the same way as for buying a property, but allows time once in the country to look around for a property to purchase without the pressure of time. Many properties abroad can be rented on longer-term leases than in the UK.

If an individual is a UK tax resident, when the main property (their home) in the UK is sold and they move abroad, they will not be liable to pay capital gains tax on the profit. If a second home or a property that is not their main residence in the UK is sold, then capital gains tax will be due on any profit made as a result of the sale. Where someone moves abroad and retains a second property in the UK and then this is sold after they have become a tax resident of the country to which they have moved, UK capital gains tax will be due on the proceeds of the sale for the first five years of non-residence, and there may be double taxation, which may or may not be resolved by a Double Tax Treaty.

If an individual is working abroad on a temporary basis and this does not affect their UK tax residency status, it is possible that some of the costs of renting a property in another country can be claimed under UK tax law when completing the next tax return.

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