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bigduckontax, Accountant
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I am a UK citizen resident in Cyprus I have properties in

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I am a UK citizen resident in Cyprus
I have properties in the UK which I rent. Some of these properties are mortgaged. My question is what is the most beneficial structure for tax given that I work and live in Cyprus but own properties in the UK. Should the properties be owned by a foreign company or is it best for them to be owned in my personal name. I intend my children to inherit these properties.
Hello, I'm Keith and happy to help you with your question.
Firstly, when you left the UK did you complete a form P85? If you did not then you should do so immediately. The form is available on the web and can be filed on line. There is no time limit as to its submission. On receipt HMRC will classify you as non resident for the tax year after your date of departure and furthermore split the year of leaving into two portions, one resident and the other non resident.
Having got rid of that small administrative point we can get down to business. Your question is a sort of six of one and half a dozen of the other.
Your property income in the UK will be subject to UK income tax. As an UK citizen you will retain your personal allowance, currently 10K. From your rentals the following expenses can be deducted [Which date}
'The most common types of expenses you can deduct are:
Water rates, council tax, gas and electricity
Maintenance and repairs to the property (but not improvements)
Contents insurance
Interest on a mortgage to buy the property
Costs of services, including the wages of gardeners and cleaners (as part of the rental agreement)
Letting agents' fees
Legal fees for lets of a year or less, or for renewing a lease of less than 50 years
Accountant’s fees
Rents, ground rents and service charges
Direct costs such as phone calls, stationery and advertising for new tenants
The expense should be incurred wholly and exclusively as a result of renting out your property.'
On your death the properties will all be aggregated into your estate for Inheritance tax (IHT) purposes and any amount over 325K taxed at a flat rate of 40% which is reduced to 36% if over 10% of your estate is bequeathed for charitable purposes. You will now have to calculate your possible liability to IHT.
If you transfer the properties to a company then this will constitute a disposal for Capital Gains Tax purposes. You would be taxed on any net gain made at 18% or 28% or a combination of the two rates depending on your income including the gain in the year of sale. The gain is computed by taking the net selling price and deducting the acquisition cost which is the price paid, costs incurred and any improvements. You are entitled to an Annual Exempt Amount (AEA) of 11K this year, 11.1K next, to offset this gain so staggering sales across two or more tax years may reduce your CGT liability somewhat as indeed would transferring half to your spouse if you have one to get two tranches of AEA and inter spousal transfers are outside the scope of UK taxation. You will have to do another calculation here.
In this case on death the value of the company would be taken into account for assessing your estate for IHT purposes. There is no CGT liability on death, merely IHT
So you see whichever way you turn your are caught by Benjamin Franklin's dictum that in life there are but two certainties, death and taxes! You will have to sit down with a wet towel round your head and the backs of lots of envelopes to see which is the most economic option. Frankly, I don't think that you will find much in it, it's the accounting equivalent of a lemon. Marginally not using a company will be a modest loser, but there won't be much in it.
I do hope I have helped shed some light on your position.
bigduckontax and other Tax Specialists are ready to help you
One further point which I should mention. You may incur Cypriot tax on this rental income also. However, under the Double Taxation Convention between the UK and Cyprus the same income stream cannot be taxed in both jurisdictions. The tax you pay to HMRC is allowed as a tax credit against any local taxation. The Convention does not protect you from differences in rates of tax between the two states.