Possible new stamp duty charges for overseas buyers

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Post by clombardelli on Sun Jan 24, 2016 11:40 am

Did any of you see this article in the Telegraph ?  If I am reading this right it would seem to indicate that if you buy a holiday home abroad and use it for rental purposes, from April you would possibly have to pay the UK government a 3% stamp duty surcharge .  Also if you have a holiday home overseas and no property in the UK and then buy one - you would be deemed as a second home owner and charged the incremental stamp duty. 


Crazy or what ?
http://www.telegraph.co.uk/finance/personalfinance/tax/12113101/A-home-in-France-You-may-face-the-UK-buy-to-let-stamp-duty-surcharge.html

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Post by Panner on Sun Jan 24, 2016 3:17 pm

It would not apply to the purchase of the holiday home (or any other home) abroad as such a purchase is not liable to UK stamp duty

However, someone owning a home abroad before purchasing a UK property could be caught in respect of the UK property purchase.

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Post by modicasa on Mon Jan 25, 2016 6:03 am

Wouldnt that depend on their residency and domicile?  Charging a UK resident to buy a house as their primary residence in the UK is legally dubious.   But nothing surprises me any more.  Osborne economic illiteracy knows no bounds.

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Post by Gala Placidia on Mon Jan 25, 2016 6:54 am

I would tend to agree with Modi's opinion. The other alternative defies common sense... But then....Rolling Eyes
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Post by Panner on Mon Jan 25, 2016 7:55 am

UK Stamp Duty is a tax on transactions taking place in the UK. It has nothing to do with the tax residence or domicile of the purchaser.

The rules have not been finalised yet, there is a consultation document on the proposals (closes 1 Feb). The proposals include an exemption for a purchase replacing your main residence which include a refund if the previous main residence is sold within 18 months of the purchase. Not really much different from Italy where the transfer tax on second homes is more than on Prima Casa, only available to residents or those registering as residents within 18 months of acquisition.

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Post by modicasa on Tue Jan 26, 2016 6:26 am

Quite alot different though, if you assume that taxes in Italy are payable on rateable value and in the UK on the price paid - a price paid which is inordinately high given the market.   

I would say it does have an impact on domicile - which as we know is of great interest to HMI of Taxes.  I havent seen the artcile but assuming its about 'holiday homes' as the OP said, residence and domicile do come into it, as to whether you are a British tax payer or not.  As a holiday home owner overseas, presumably I am not resident overseas, but merely have a holiday home - if you see what i mean, in which case where is my tax domicile?  If I sell my holiday home I will get a refund from the govenment for what exactly? Whreas moving my domicile from one country to another would allow me an exemption?  I think the tax man will have a field day.

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Post by Panner on Tue Jan 26, 2016 7:00 am

Whilst the amounts may be different the principle is the same.

So far as domicile goes. It depends what you mean by domicile. For UK tax purposes domicile has a particular meaning and is very difficult to change. You can leave the UK, live abroad for years but remain UK domiciled for tax purposes. There are people who have never, or very rarely, set foot in the UK for many years who are still UK domiciled. In practice domicile now has little impact on taxes for most people. Its main impact relates to IHT and to people moving to the UK, for some income tax purposes.

Residence (for tax purposes) is a different matter. Since the introduction of the statutory definition it is now much easier to determine if you are tax resident in the UK or not.

For someone whose main residence is in the UK and who has a holiday home abroad, or wants to buy one, the changes will have no impact. However if they want to buy a second home in the UK (whether they are UK tax resident or not) then the changes will impact.

Someone who has been living abroad and has one overseas property as their primary residence who wishes to move back to the UK and buy a property which is to be their main residence will be impacted if they wish to retain their overseas property (under the proposals). If they sell that overseas property within 18 months then they would be able to get a refund of the additional stamp duty payable on the purchase of their UK property.

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Post by modicasa on Tue Jan 26, 2016 7:52 am

Panner you are exactly right.  It is domicile that is the thing - and seeing that teh HMI can say you are domiciled in the UK if you have your driving licence sent to your mum's address, but you are resident abroad, it all gets incredibly complicated.  So if you are tax resident in the UK if you spend more than 90 days there, tax resident in ITaly if you spend more than 183 days, but domiciled in the Uk if you have a mail address  (not too far from the truth), who will decide where you first and second home is?  Presumably the tax man.

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Post by Gala Placidia on Tue Jan 26, 2016 8:04 am

I was interested in this topic, as the UK does not fully apply the 183 day rule, as it is the case in other countries. I had a look at this https://www.gov.uk/tax-foreign-income/residence and it is fairly complicated. Going back to the UK to visit family and friends for more than 16 days seems to create problems... You would be better off with the 183 day rule.
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Post by modicasa on Tue Jan 26, 2016 2:55 pm

Exactly right Gaia, its a complete minefield - and ultimately the tax man will win!

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Post by Panner on Tue Jan 26, 2016 3:58 pm

Whilst it is a minefield it is not as bad as it used to be before the statutory residence test was brought in by the UK. Until then the question of residence for tax purposes was dependent on the facts and the interpretation of those facts was guided by over 100 years of tax cases heard before the courts. Whilst most people were clearly either resident or not there was a very wide grey area. The statutory residence rules  reduced that significantly. Domicile (in the UK tax sense) really has nothing to do with tax residence these days apart from for Inheritence Tax Purposes and to give non UK domiciled individuals who are tax resident in the UK a potential advantage for a period after moving to the UK.

The 183 day rule is not the sole rule in many countries and it is possible to be tax resident whilst spending very little time in a country if there is a close connection. It is also possible to be resident in more than 1 country at the same time under a countries domestic tax legislation. However most countries have double tax agreements that normally provide that an individual can only be tax resident in one of those countries. There are a series of tie breakers in those agreements (the last usually being nationality if it is not clear from the earlier tie break provisions) and if those do not resolve it the 2 governments have to agree it between themselves.

As for the tax man winning. They do not always win and they are wrong more than most people realise. Although getting them to admit it can sometimes be hard work. Having spent a considerable number of years in dealing with tax planning and the UK tax legislation I have come across many situations that HMRC have been successfully persuaded that they are wrong, as well as many cases where they have been proved wrong in their interpretation before the courts.

As always, if the situation is complex and there is a potential liability to UK tax that is dependent on the question of tax residence, where that residence is not clear, then proper professional advice should be obtained.

The minefield can be navigated and most situations resolved, but it is easier if you know how and which particular minefield you are in danger of falling into.

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Post by Flip on Tue Jan 26, 2016 5:29 pm

What one must remember in all these scenarios is that it's down to the individual to declare such information, as the likelihood of HMRC ever checking everyone's movements between Countries to enforce these laws/edicts is never going to happen; so as long as one is careful and frugal on the info given to said body, then the chances of a threatening manilla envelope dropping on ones doormat is as likely as a lightning bolt up the jacksie.
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Post by Admin on Wed Jan 27, 2016 8:44 am

I would have once agreed with you Flip but I know several people in Marche who received hefty fines from the Italian tax authorities for not declaring they owned properties in the UK. Basically, the Italian tax office had got in touch with the UK one and compared the information and checked up on their assets. I think we are making a big mistake if we assume they are not joined up these days.
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Post by Gala Placidia on Wed Jan 27, 2016 9:13 am

I agree with Admin, I believe that nowadays it is very difficult to not declare, or even under declare income or assets held internationally. Governments have created networks where they exchange information. Even taxation heavens are not as opaque as they used to be. The key to "minimize" or reduce to acceptable levels, what has to be paid and to whom, is to use qualified and efficient professional advice, who will also be fully conversant with international taxation treaties. The trouble is that, although this is widely available to corporations and very wealthy individuals, ordinary people cannot have access to them...
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Post by alan h on Wed Jan 27, 2016 9:14 am

Flip wrote:.............. the likelihood of HMRC ever checking everyone's movements between Countries to enforce these laws/edicts is never going to happen; ......................

With the current UK checking/recording regime of people leaving and entering the UK, I would assume one is only a computer click away from 'being rumbled'.
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Post by Admin on Wed Jan 27, 2016 9:17 am

My UK bank told me they would be electronically transmitting to Italy and annual summary of incomings and outgings in my bank account to the Italian tax authorities to comply with some new EU regulations. Big brother is here and watching!
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