Q for expat living in UK - tax implications for buying a property

[babushka]

I have a questions for expats who have lived or currently living in the UK, on the tax implications for buying a property.

We are moving to London with a 3 years sponsored visa (new job for hubby). We would like to stay between 5 to 7 years (visa needs to be renewed at the appropriate time). After this, we want to return to Australia to retire.

We are currently renting a house in London, but would like to buy something to live in (undecided on whether it would be an apartment or a house) towards the end of 2012. This is because we prefer to live in our own house, instead of living in others with tenants' restrictions in being able to modify the property to our needs and taste. When we return to Australia, we may rent the property out or sell it - undecided on this.

We will be classified as "non-residents" for Australian tax purposes - and pay non-resident tax rates on our properties and investments in Australia. Hubby will pay UK taxes on his UK salary. We do not intend to invest in the UK at this stage - but prefer to maintain our assets in Australia. We have a PPOR (which will be rented out while we live in the UK), a family trust with investment properties and a self-managed super fund.

Two different people in the UK have told us that we should not buy a property in the UK - because this could have severe tax implications for us! They did not elaborate on the reasons, but said that if we bought a house to live in then it could be construed (by the tax authority) that it would be our intent to live in the UK permanently. Thus, we would be taxed on our "worldwide" income, and not just the UK sourced income!

Does any expat have views on the above? Thanks in advance for any comment(s).

 

[jguye]

Hi,

You should seek advice from these Tax Accountants that specialise in aussie expats. I have an expat friend that uses their advice & services.

http://www.smats.net/

Cheers

 

[babushka]

Hi,

You should seek advice from these Tax Accountants that specialise in aussie expats. I have an expat friend that uses their advice & services.

http://www.smats.net/

Cheers

Thanks, jguye, for the link. I will look into it.

 

[Terryw]

If you do buy then carefully consider estate planning and your wills. UK has a form of estate death tax and if you get in wrong your australian assets could be caught up and may be taxable in the UK on your death. This may or may not apply to your situation.

 

[babushka]

If you do buy then carefully consider estate planning and your wills. UK has a form of estate death tax and if you get in wrong your australian assets could be caught up and may be taxable in the UK on your death. This may or may not apply to your situation.

Thanks, Terry, for your reply.

It did occur to us that the estate death tax may be a problem / issue for consideration for owning assets in the UK. However, we do not have any children - so this is not a big issue for us.

 

[Terryw]

Thanks, Terry, for your reply.

It did occur to us that the estate death tax may be a problem / issue for consideration for owning assets in the UK. However, we do not have any children - so this is not a big issue for us.

Hi Babushka

Well, you have to leave it to someone (I am available) so it could be an issue. I am not sure how it works overthere. It could be that it would also be simply resolved by creating a UK will and an Australian will.

 

[babushka]

Hi Babushka

Well, you have to leave it to someone (I am available) so it could be an issue. I am not sure how it works overthere. It could be that it would also be simply resolved by creating a UK will and an Australian will.

He he Everyone wants to know whom we will leave our money to. We said our dogs will inherit it. Well, at the moment, the liabilities are greater than the assets!

We have Australian wills, but will look into the UK wills aspect. A good pointer. Thanks.

 

[babushka]

Hi,

You should seek advice from these Tax Accountants that specialise in aussie expats. I have an expat friend that uses their advice & services.

http://www.smats.net/

Cheers

Just want to update that I sent an email to smats and got a reply - their views were helpful (although they are specialised in non-resident aspects of Australian income tax). I appreciated their views which help us in deciding the purchase of a property to live in the UK while working there, would have significantly impacted our tax situations in Australia.

 

[joeExpat]

Two different people in the UK have told us that we should not buy a property in the UK - because this could have severe tax implications for us! They did not elaborate on the reasons, but said that if we bought a house to live in then it could be construed (by the tax authority) that it would be our intent to live in the UK permanently. Thus, we would be taxed on our "worldwide" income, and not just the UK sourced income!

Does any expat have views on the above? Thanks in advance for any comment(s).

The advice you got is rubbish.. the UK is a particularly good tax haven for expats and you are not taxed on any of your world wide income since you are classified as "non domiciled". Any investments you make outside the UK while there are not taxed, even a cash deposit in channel islands. Locals don't enjoy the same privileges.
It is very hard to change domicile, you have to live there 17 out of 20 years, which is good.

 

[babushka]

The advice you got is rubbish.. the UK is a particularly good tax haven for expats and you are not taxed on any of your world wide income since you are classified as "non domiciled". Any investments you make outside the UK while there are not taxed, even a cash deposit in channel islands. Locals don't enjoy the same privileges.
It is very hard to change domicile, you have to live there 17 out of 20 years, which is good.

Thanks, Joe. You are right. I have read up further in the HMRC website which basically said that - we will be classified as residents for tax purposed but domiciled abroad (ie non domiciled) and so we can choose to be taxed on a remittance basis (ie only UK income and gains, and foreign income and gains which we bring to the UK - which in this case, we do not!) Am not really sure why the 2 people have cautioned us not to buy a house in the UK to live in, and the annoying thing was that they did not elaborate on the reason(s). That was why I wanted to check it out with other people.