The days when overseas property and investments were largely invisible to the UK tax authorities are well behind us. International treaties together with the availability of computerised records mean that HMRC are able to access vast amounts of information about our affairs across the globe.
One of HMRC’s latest targets relates to overseas homes. Initially the focus will be on those with overseas property and assets of between £2.5 million and £20 million. Those investigated will be asked to provide evidence of how overseas properties were financed. In addition, HMRC will be looking for proof that income from letting the property has been declared or that no income has been received.
As with any overseas investment, the tax implications in respect of income, allowances and capital growth vary depending on the countries involved. A simple wording change in a document or transfer of funds at the wrong time could lead to an unexpected tax bill. It is therefore vital that appropriate tax advice is taken at the outset to ensure that the tax implications are fully explored.
Just looking at one issue, those letting two overseas properties will normally be able to offset losses from one property against profits from the other. However, those with one property in the UK and one abroad cannot offset losses from one against the other. Structuring the property ownership appropriately is therefore extremely important when looking to mitigate tax.
Even without the complications of a second property abroad the need to receive appropriate advice in respect of overseas investments has been highlighted this week. HMRC have announced the formation of an Offshore Co-ordination Unit (OCU). With the brief of finding new ways to identify and tackle overseas tax evasion, the unit will bring together “a team of highly-skilled offshore analysts, technical tax experts and experienced investigators.” Initially concentrating on the recently signed UK-Swiss tax agreement, this team represents the first instalment in the appointment of 100 new offshore investigators.
As tax mitigation specialists Newshams are able to give advice on how international investments should be treated as part of an overall tax strategy.
Contact us now on 020 7470 8820 and ask to speak to a tax adviser about the potential tax implications of international investments or e-mail us at firstname.lastname@example.org and we’ll get straight back to you.
23 November 2011