Maximising property tax relief and reducing the impact of capital taxes through effective asset structuring.
Property tax in the UK has undergone considerable change in recent years.
Tax avoidance remains under the spotlight, and burdens and risks associated with tax liabilities have increased for both property investors and property developers.
Property tax also provides a substantial income stream for the UK government. At current levels, property tax as a share of total taxation is higher in the UK than anywhere else in the developed world.
Which means for property owners in the UK, minimising the impact of increasingly unfavourable property levies through tax planning has become business-critical.
It is a hugely complex area, with factors determining your tax liability ranging from the type of property concerned to the structure used to hold your real estate assets or of any real estate transaction – acquisition, disposal or development. Careful navigation is essential to maximise the opportunities for improving your tax treatment.
Here to help
ETC work with private individuals, companies, pension funds and private equity funds to deliver effective tax planning of their property assets while meeting HMRC compliance requirements.
We have extensive experience of advising both property investors and developers on all aspects of property tax and structuring, such as Stamp Duty Land Tax (SDLT), VAT and capital allowances.
This includes in-depth knowledge of the commercial and tax drivers affecting property ownership, and related exposure to Inheritance Tax (IHT) and Capital Gains Tax (CGT).
Our experience covers both residential and commercial properties in sectors ranging from leisure, tech, health and construction.
We have particular expertise in advising property investors and buy to let landlords on how to structure their portfolios and how they are affected by changes such as the phasing in of a reduction in income tax relief on finance costs, which commenced on 6 April 2017.
Our specialist property tax advisory services also encompass non-UK domiciled individuals and non-UK residents, who have arguably suffered even more over the years at the legislator’s hand than those based in the UK.
Our advice for UK and cross-border investors and developers of UK property ensures that ownership structures are tax-efficient and meet the commercial needs of your business.
We also offer specialist experience in large-scale overseas property developments, and have recently provided tax advice on creation an investment structure for a US hotel complex looking to raise capital and targeting UK resident investors.
We have also been involved in the process of setting up a Real Estate Investment Trust (REIT), which is to be listed on the Channel Islands Stock Exchange.
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Property tax advice for investors
There have been a number of significant changes over recent years impacting UK-based property investors.
These changes need to be factored in to your business model, and it may be desirable to review whether your business model remains appropriate.
Property is an asset class – whether residential or commercial – which is usually exposed to both IHT and CGT. We are leading the way in advising property investors and buy to let landlords on how to structure their portfolios.
For example, we advise buy to let landlords on how reduced income tax relief on finance costs will affect their particular situation and the options available to restructure things.
For commercial landlords, we provide guidance on the impact of other recent tax changes and the availability of tax reliefs such as capital allowances.
We can advise on the most appropriate structure for commercial and residential property ownership and disposal to meet your specific requirements and minimise tax liabilities under for example SDLT and CGT.
We have particular expertise where international aspects are involved, such as bringing an overseas structure onshore, holding an investment property in an overseas company, or transferring property within an organisation.
Owning multiple residences raises a number of property tax issues, such as IHT, CGT and SDLT, each requiring careful tax planning.
We can advise on effective asset structuring and the tax issues that arise from the ownership of multiple residences.
Property tax advice for developers
Property development is a venture ‘in the nature of trade’, and, assuming other conditions are met, the property development activity will qualify for valuable reliefs, such as Entrepreneurs Relief (ER) for Capital Gains Tax purposes and Business Property Relief (BPR) in respect of IHT.
It is common, for commercial purposes, for a property developer to operate each development through a separate SPV. This can also achieve attractive tax benefits.
We can advise on how to approach this structure from a tax point of view, including the recent targeted anti-avoidance rules surrounding so-called ‘phoenix companies’.
We can help you meet your compliance obligations for enveloped dwellings. We can advise on the implications for CGT, SDLT, and ATED purposes, including reliefs where possible.
The Annual Tax on Enveloped Dwellings (ATED) applies to non Natural Persons’ (NNP) owning UK residential property with a value in excess of £500,000. While certain reliefs are available from the ATED charge, it is common for the only asset of an NNP to be the property in question.
This can raise issues around funding payment of the ATED without falling within the definition of a remittance and causing further UK tax consequences.
Whatever your interest in overseas property, you must ensure you are meeting tax liabilities, in all relevant jurisdictions.
We are experienced in providing tax planning and advisory services to property owners based in the UK and overseas covering all types of real estate across the globe.
Stamp Duty Land Tax (SDLT)
SDLT has undergone substantial change in recent years. Increased standard rates; devolved systems for Scotland and Wales; the introduction of new categories for additional residential properties and high-value residential property transactions.
The rules have never been more complex, requiring professional advice to ensure compliance while managing tax liability through effective planning. For example, opportunities remain to reduce SDLT rate through the multiple dwellings relief, and the purchase of six or more units in a single transaction can still benefit from lower rates applicable to commercial property.
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Summary of the Non Resident Landlord Scheme
The non resident landlord scheme prevents non resident landlords from paying tax on the rental profits of their UK property, whether they refrain from doing so by intention or on the belief that tax is not due. The UK tax code is notorious for its complexity. Even more so where international elements become involved.
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PROPERTY TAX ADVICE
Essential information about property tax liability.
Property tax as a share of total taxation is currently higher in the UK than anywhere else in the developed world.
Property tax can be an extremely complex area, and the amount of tax you end up paying will depend on a number of variables; from the type of property you own, to the structure used to hold your property assets to the transaction itself; whether that’s an acquisition, disposal or development.