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bigduckontax, Accountant
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I'm foreign investor who is planning to buy commercial property

Customer Question

I'm foreign investor who is planning to buy commercial property worth 4.5m. Targeted property contain retails in ground floor, and above GF this property just got permission to convert its offices spaces to residential. So the aim of our investment is to buy the property and refurbish it and sale it. Investment time is one year. So, my question is, what will be our taxes in acquisition and disposition? Including stamp duty if applicable.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
There are no taxes as such on acquisition of landed property in the UK, but there would be a Stamp Duty Land Tax of 4%, on GBP 4.5m = 180K on the consideration.
On disposal any gain made would be subject to Capital Gains Tax (CGT) which is calculated by taking the net selling price and deduction the acquisition price plus any improvement costs. However, if you have been non resident in the UK for 5 years before these transactions then you would be exempt CGT. Beware, the law on this is changing and now you would be assessed for CGT on any gain from an April 2015 valuation.
There is a danger that HMRC might class you as a property trader, it has happened to those with only one property they redevelop in the past. Should HMRC do this then any profit made on the transaction would be subject to UK Income Tax which you might escape as a non resident. The rules on residency for tax purposes are highly complex. If you spend over 183 days in the UK in any one tax year (6 April to 5 April) then you will be liable to IT. If your spend less than 91 days in any one tax year in the UK you would be classed as non resident. This 91 days may be averaged over four years, but the general consensus amongst experts on this site is never to exceed the 91 day limit.
I do hope I have helped shed some light on your position. Large sums are involved here and I would advise you to retain a competent professional in the UK to oversee your interests.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3612
Experience: FCCA FCMA CGMA ACIS
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Customer: replied 2 years ago.

Thank you Keith.

Before you go to me questions below, I just want to clarify that we will invest through company not under individuals names.

When you mentioned stamp duty 4%, is it because its commercial?

How much is CGT if applicable on us?

If we become classified as trader, what will be Income tax?

Thank you,

Abdullah

Expert:  bigduckontax replied 2 years ago.
Hi Abdullah
Sorry for the delay in response, but I am answering this question from the States and we are five hours behind the UK here.
Stamp Duty Land tax at 4% is that applicable to mixed properties.
If you invest through a company, companies are not subject to CGT any gains made being rolled up in the company's Profit and Loss Account. Also the Corporation Tax regime to which companies are exposed as opposed to Income or Capital Gains Tax treats all activities as trading. You last follow up question then becomes a dead duck.
If you use an UK company as the investment vehicle then all the gain will form part of the company's profit. If it is an overseas company only the gain post April 2015 will be subject to tax as I explained.
I do hope I have coveres all the points for you. Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 2 years ago.

Thank you,

But still one thing not clear, if we bought mixed use property for 4.5 million and refurbish it by 1.5 million then sale it after 18 months for 8 million, what will be the tax percentage on profit (after all expenses and exemption if any)?

Abdullah

Expert:  bigduckontax replied 2 years ago.

The company's CT liability on this transaction would be 8m - 6m (4.5 + 1.5) and CT at 21% would apply.

Thank you for your support.

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