 There may be relief at last on UK taxation of overseas holiday
homes owned through companies according to the Federation of Overseas
Property Developers, Agents and Consultants (Fopdac).
Many investors have previously bought holiday homes in the name
of companies to avoid the effects of heavy foreign inheritance
tax or to avoid the application of foreign inheritance rules.
It has been particularly common to buy a French property through
a locally incorporated Property Holding Company (Société Civile
Immobilière or ‘SCI’).
The UK Revenue has been unhappy about such arrangements as it considers
them to be benefits in kind assessable to UK Income Tax, even though
the intention underlying the arrangement was to avoid local rules
rather than UK rules.
Fopdac believes the UK Revenue is now accepting the bona fides
of such arrangements and it was announced in the Budget speech
that legislation would be introduced exempting any charge.
The exemption, assuming it follows the lines of the announcement,
will apply to companies which are owned by individuals; where the
overseas property is the only or main asset of the company; the
activities of the company are incidental to the ownership of the
property; and where the purchase is not funded by a loan from a
connected company.
It is very uncertain of the extent to which the UK Revenue has
raised assessments to date but the announcement indicated that
the legislation, which will probably only appear in the Finance
Act 2008, would have retrospective effect and, provided the conditions
described above are met, no assessment is likely to be raised in
the period leading up to the enactment of the legislation.
It has also been predicted that it is to become easier for Brits
living and looking to buy in France under the new Sarkozy regime.
Trevor Leggett, Executive Director, Leggett Immobilier explained
that new President, Nicolas Sarkozy has a raft of reforms that
he is quickly putting in place to improve the French economy.
The planned reforms will also boost investment choices, which is
good news for British investors, who have perhaps been discouraged
from investing in France due to high levels of inheritance tax,
the highest social security charges in the world and, of course,
the wealth tax (ISF).
Now all these taxes are in for reform and in this positive climate
France really does look better than ever as the place for investment.
The new president would also like to see the number of home owners
increase to match the rates in the UK and is putting in MIRAS-style
tax breaks in place to assist home buyers.
|
