The following information provides a brief note on the acquisition and investment of and in property in the United Kingdom and outlines in summary the relevant tax implications. Our office can provide you with detailed guidance in relation to the acquisition of and investment in property within the United Kingdom and provide you with a tailored solution for your personal requirements.
Acquiring and investing in property in the UK
There are no restrictions on foreign nationals acquiring or investing in property in the UK. Individuals and companies may purchase or rent/lease property for their own use or as an investment, subject only to payment of the relevant taxes.
There are a number of structures that can be used to invest in property in the most efficient way possible.
How is land purchased?
Typically, a purchase involves a 2 stage process that involves (1) an exchange of legal contracts between the buyer and the seller followed by (2) completion of the sale, which is the legal transfer of the properly to the buyer.
The seller’s solicitor will prepare a draft contract of sale which is subject to negotiation. During this time, the buyer’s solicitor will usually carry out searches and make enquiries as to the property, including with the seller’s solicitor. Once the contract of sale has been negotiated and the seller and the buyer have reached agreement in principle, the contract of sale is exchanged with the buyer usually paying a deposit.
The second and final stage is completion, which affects the legal transfer or conveyance of the property from the seller to the buyer.
Summary of the tax implications:
Value Added Tax or VAT – VAT (the rate of 20%) is applicable to most commercial property transactions, but there are exceptions.
VAT is not applicable to residential property transactions
Stamp Duty Land Tax or SDLT must be paid by a buyer of property in the UK on the purchase price. The price is defined broadly. The rate is up to 4%.
SDLT is also payable on by the purchase (the tenant) on the grant of a lease on the premium and on rent. 1% SDLT is payable on the rental element
Rents received from UK property are subject to income tax, even for non-residents. Non-residents may be required to participate in the Non-resident Landlord scheme which provides for tax to be deducted by tenants or letting agents from rent.
With effect from April 2015, capital gains made by non-residents will be subject to capital gains tax.