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Owning a home abroad

When buying property abroad it is often necessary to set up a company to own that property – either because non-residents are not allowed to own property in a particular country, or to avoid unwelcome inheritance issues.

In the past this has often given rise to additional tax. The owner was likely to be a director, or deemed to be a shadow director, of the company and so taxable under the benefits-in-kind rules on accommodation. Sometimes it was possible to argue that the company was holding the property only as nominee for the individual and effectively “look through” the company, but this was generally more difficult if the property was being let out to other people for part of the year.

The legislation was changed this year to prevent a tax charge arising in certain circumstances. It is important, however, to check that your situation is specifically covered by the new legislation:

  • The company must be owned by individuals.
  • The company must, broadly, have owned the property all the time since the individuals acquired the company. 
  • The property must be the main or only asset of the company.
  • The activities of the company must relate almost wholly to the ownership of that property. 
  • The company can be the subsidiary of another company as long as the holding company does nothing other than own the subsidiary.

The legislation was, unusually, wholly retrospective in effect so if you need to revise a return for an earlier year you will need to act quickly. The deadline for amending a 2006/07 return expires on 31 January 2009.
 

 

 

Date: 27th December, 2008
Author: Rachel Haddow

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