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Tax Advisor Welcomes UK Overseas Property Exemption

by Robert Lee, Tax-News.com, London

19 July 2007


The Chartered Institute of Taxation (CIOT) has welcomed UK draft legislation exempting individuals from a benefit in kind charge on their own overseas properties.

“It is good to see HMRC carrying through their commitment to remove this unfair tax charge on people buying properties abroad. This follows a number of papers submitted and meetings held, driven by the CIOT, and others, highlighting the issue and making the case for the exemption. There are some aspects to discuss during consultation but the draft is a good starting point," commented John Whiting, Chairman of the CIOT’s Management of Taxes Sub-Committee.

The draft legislation, released by HM Revenue and Customs on Tuesday, follows on from an announcement in the March Budget.

UK tax legislation contains rules that give a benefit in kind tax charge in most circumstances when an employer provides accommodation for an employee, but these rules can technically catch a situation in which UK individuals buy an overseas property through their own local company – something that is common in France and Spain, and also in newer destinations such as Bulgaria. This is because the individuals are deemed to be directors of their overseas company and so provided with accommodation by it, even though they are normally providing all the funding for the property out of their own resources.

John Whiting continued: “Buying a property abroad is increasingly common and purchases are often made through a local company. There is no tax avoidance involved: typically it can be for local regulatory reasons. Given that the UK buyers have bought the property out of their own resources it is an odd and unfair result if a UK tax charge arises."

He concluded: “It is also good to see that the new rules will be retrospective to 2003. Whilst HMRC have generally not collected tax in these situations, pending resolution of the issue, anyone who has paid a benefit in kind tax charge will be able to claim their money back.”

A comprehensive report in our Intelligence Report series giving background tax and residence information on many of the key offshore jurisdictions is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report4.asp

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