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Where Taxpayers and Advisers Meet

Strategy to adopt- Higher tax payer-

ben1234
Posts:3
Joined:Mon Nov 05, 2018 2:36 pm
Strategy to adopt- Higher tax payer-

Postby ben1234 » Mon Nov 05, 2018 2:44 pm

Good afternoon,

I am new in this forum and would like to ask a question no one seems to be able to answer.

With my wife we are owning few properties in France and we are both living in the U.K, and being high tax payer (40%)
In France the way we rent and make declaration is very beneficial resulting in paying no tax there, but here in the U.K. we are loosing all the benefits of our strategy as we are paying both high taxes on top of our annual income. The difference is massive between both countries. And now the fact that the % interest of the mortgage to declare has been reduced it is even worse!

I would like to know if it would be more beneficial to putt and add properties through a new company we can create as then we will declare the income from the company rather to add these income on a self assessment where we are both on high tax rate?

If so what is the best option to consider? Otherwise any advice?

Many thanks in advance

Ben

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Strategy to adopt- Higher tax payer-

Postby AGoodman » Mon Nov 12, 2018 12:24 pm

It is complicated with UK property and more so with foreign property.

There can be benefits re: tax rate and deduction of interest but bear in mind that:

1. You will have to pay French/UK CGT on any profits (if the value has increased) when you transfer existing properties to a company
2. It will have to be a UK company - if you transferred to a foreign company, the company's income would be attributed to you personally under the transfer of assets abroad legislation.
3. There will also be French tax consequences.
4. There are UK SDLT consequences (deemed consideration, higher rates) if you do this with UK properties.

ben1234
Posts:3
Joined:Mon Nov 05, 2018 2:36 pm

Re: Strategy to adopt- Higher tax payer-

Postby ben1234 » Mon Nov 12, 2018 12:50 pm

Dear AGoodman,

Many thanks for your reply and for your advise.

I now understand clearly the implication of moving them to a company.

If in the future i would like to purchase more properties, what difference in tax declaration would it be if i add them to a Uk company Vs a french company?

For Uk company, obviously i know about the corporation tax (20%) and the fact that if i do not pay myself i will not be affected personally . What about if it is a French company that owns this future property?

Many thanks

Ben

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Strategy to adopt- Higher tax payer-

Postby AGoodman » Mon Nov 12, 2018 1:26 pm

Not a lot of difference in buying a new French property. Neither is likely to be a taxable event in the UK. If buying a UK property, higher rates of SDLT apply to any purchase of residential property by any company (3% surcharge and possible 15% rate if property worth over £500k).

If you are UK resident and buy using a French company, the TOAA legislation I mentioned will likely attribute rental income to you personally - so you will pay income tax - and TCGA s.13 will likely attribute any gains made on sale to you personally as well.

This gives you higher rates and makes it harder to obtain tax credits for French tax (still possible I imagine but more complicated as the French company will be paying the French tax).

ben1234
Posts:3
Joined:Mon Nov 05, 2018 2:36 pm

Re: Strategy to adopt- Higher tax payer-

Postby ben1234 » Mon Nov 12, 2018 2:24 pm

many thanks AGoodman for these precious information.

So, as a UK resident and high tax payer, if i want to invest in property in the future but doesn't need to pay myself with the income rental, the best way in this situation would be to buy the properties under a UK company , leaving any revenue in this company so only 20% corporation tax will be paid, a long as i do not withdraw any money?

in regards of my current properties , nothing more i can do , just continue to declare them on a self assessment and pay high tax band on them.

is that correct?

Many thanks for your advice


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