Investing in UK Property – Opportunity or Minefield?

UK property has always been attractive to overseas investors who see the underlying stability of the UK economy (despite the problems in recent years), the growth in value of quality property, and UK’s fairly-transparent ownership laws coupled with steady and sometimes spectacular returns, as the place to invest their surplus funds.

But the purchase of UK property is not so straightforward and in years spent specialising in advising those in the property sector, I have refined my questionnaire of the key considerations:-

  1. Are you clear of your intentions in respect of the property in question – is it a pure investment, are you planning to hold it for the long or short-term, are you developing it for your own use or for subsequent sale?
  2. Which is the right structure to use? – a company (offshore or onshore), personal ownership or through a partnership or LLP, a limited partnership or a trust?
  3. Is it residential or commercial, or a mixture?  Is it currently used as commercial but has potential to be converted to residential?
  4. VAT is a major consideration.  Have all aspects been considered and have the necessary actions been taken prior to contracts?
  5. Stamp Duty Land Tax may be an issue, has this been considered and have alternative structures that may mitigate this been taken into account?
  6. What is the likely tax impact on exit?  Will the property be subject to Income Tax or Capital Gains Tax, or possibly a double charge to both Corporation Tax and Capital Gains Tax?
  7. Does the cashflow work?  Are borrowings tax-efficient?
  8. What happens on distribution of profits to co-owners, joint-venture parties?
  9. Is there a potential Inheritance Tax problem caused by direct ownership of property in the UK?
  10. How is the rental income taxed and can it be paid directly to you?  What expenses can be deducted?

And the biggest question of all – have you taken appropriate professional advice prior to signing any documentation that may compromise your position?

Keith Graham – Managing Partner

Westbury Accountants and Business Advisors is an accountancy practice based in London. Westbury have been providing Accounting and Tax solutions to small and medium sized businesses since 1936. Talk to the team at Westbury on 0207 253 7272 or visit http://www.westbury.co.uk.