The Fry Group—a new Corporate Plus member of the British Chamber of Commerce in Japan (BCCJ)—hosted an informative evening about financial matters for BCCJ members on 11 November.
Accompanied by my colleague Justin Davies, I presented an overview of the UK tax regime for British real estate and the latest intelligence on UK government proposals outlined in the summer budget concerning residential property.
I gave an overview of income tax, capital gains tax, inheritance tax and stamp duty, together with some examples, and took part in a number of Q&A sessions. Also discussed were options for owning property in the UK. The definition of rental profit and allowable expenses, as well as how and when UK tax returns ought to be filed, were also covered.
I outlined the key features of the new capital gains tax for non-UK residents who sell or give away interests in British property, beginning on 6 April 2015. I then went on to explain how inheritance tax continues to apply on the global assets of most British expatriates—including those in Japan—with a useful example.
Four main proposals outlined in the summer budget were discussed. Commencing on 6 April 2017, the British government will start to phase in a new way of accounting for finance costs for income tax purposes. Basic rate taxpayers are unlikely to be affected, though this is bad news for higher-rate taxpayers.
I discussed how the wear and tear allowance, which is so important to those who rent their properties on a fully furnished basis, will be abolished on 6 April 2016. It is to be replaced with a new and more intuitive deduction. I then moved on to consider how new inheritance tax allowances will work for those who pass on qualifying interests in current or former main homes—effectively taking the maximum allowances for a couple up to £1mn, and enabling an inheritance tax saving of up to £140,000.
The British government is proposing to bring back into inheritance tax the value of shares held by non-domiciled individuals who own residential real estate through a non-UK firm.
The main messages from this useful session were that:
- Income tax regulations are much as they always have been. However, changes to mortgage interest deductions and the wear and tear allowance will require more people to file income tax returns, and will result in more tax to be payable by higher-rate taxpayers.
- Non-UK residents must complete a special non-resident capital gains tax return within 30 days of selling or giving away a residential property in the UK after 6 April 2015.
- Inheritance tax normally applies to the global estate (including assets in Japan) of most British expatriates, and careful planning is required. This is particularly the case where one spouse is British and the other is not.
- You should have a UK will, governing at least your interests in UK property.
- Those who own property through offshore firms need to carefully consider their options before 6 April 2017.
Following the formal presentation, attendees enjoyed conversation and networking, accompanied by delicious canapés, and lubricated by copious quantities of wine supplied by BCCJ member Berry Bros. & Rudd. Our sincere thanks to Julian Stevens of the firm.
If you would like a copy of the slides from the evening, please contact Justin Davies: justin.davies@thefrygroup.hk
