uk tax exempt property rental

[Jools_of_Top_Cat]

Just out of interest, if I was to accept a redundancy package and pay off my mortgage leaving a rather healthy slush fund. If I then rented the property so I could buy up and sail so to speak, would I be liable for 40% un earned income tax if I stayed out of the uk.

I ask this as my income would obviously be coming from the uk.

Just looking at options.........

<hr width=100% size=1>Julian

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[ccscott49]

Yes you would be liable, wherever you live.

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[MedMan]

Yes, but not necessarily 40% For non-resident landlords, letting Agents are bound by law to deduct tax at the basic rate from the net rent (gross rent less allowable outgoings) and remit it directly to the Inland Revenue. The rate you ultimately pay will depend, as always, on any other liabilities to tax you may have during the year in question.


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[Guest]

It depends upon your residency status.
You must be a non-resident and not ordinarily resident.
Non resident means not living here and now. Not ordinarily resident means at least one whole tax year away. Check out the Inland Revenue web site.

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[Nich39Nige]

Jules,

If you have no other income then you can set your allowances against your rental income. Remember that your wife has an allowance as well which means that you are allowed 10K before you start paying tax. All my other sources of income are offshore so the tax man gets none of that!
Only an opinion of course but my adviser tells me its good.

Nige

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[tcm]

you would be liable, yes, as others say. But you can mitigate the liability.

Specifically, you are liable for the profit in the operation. So, if say you bought a property for 100k, and then made 8k a year, then had other costs of 2k, you get taxed on the 6k income, counting this in with other uk income which might yes eventually reach 40%.

To mitigate the profit, you need other costs associated with the process of owning and renting out the house. One way to do this is to start an offshore trust company based somewhere where corporation tax is minimal or zero, with assets of 100k . The ofshore company can't buy and rent out the house, as that would be onshore trading, taxed in the UK as normal. But it could lend you the money, charging say 6%. Onshore, your annual income is now 8k, annual costs 8k, result happiness.

In time, the offshore company builds up chunks of 6k, and you borrow that too. It's not income, cos you've borrowed it, again agreeing to repay vast interest charges on repayment.

When you die, you owe loads of money to the offshore bods, so first thing is to pay that off. But you've spent all the money! So, the house gets sold, in order to first pay off all those vast debts owed to the offshore trust. Any remaining estate (not much) remaining onshore taxed at 40%. Offshore, theres no inheritance tax.

result, income tax £0, inheritance tax £0. Quite good really.





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[rallyveteran]

"Offshore, theres no inheritance tax."

...only if you have shed your UK domicile which is a very difficult thing to do, and probably impossible if you are keeping a property here.

For UK domiciled individuals IHT is paid on worldwide assets.

Becoming non-resident or not ordinarily resident is a piece of cake by comparison with trying to shed your domicile.

The notes on the Inland Revenue site are really quite good - can't believe that anyone would prefer to get (incorrect) tax advice from a chat site.

Rallyveteran



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[paulrossall]

I think you have jumped to the wrong conclusion.
What happens on a forum like this is people ask for ideas, call it advice if you want to. Lots of different sugestions are put forward and then people go away and research fully any ideas that are particularly appealing. The posting from tcm is only meant to be an idea, not proper professional advice. No-one would rely upon tcm's posting to go and move ofshore and set up an ofshore trust... would they?
Bet the Inland Revenue site does not give advice on legal means of minimising your tax bill.

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[Jools_of_Top_Cat]

Thank you all so far for ideas. This is all a little confusing at the moment, I presume offshore can mean jersey? for instance.

Are there any live aboards currently renting their uk property as a main source of travelling income, would you please take the time to contact me with any experiences, pitfalls etc.

Thank you in advance.

<hr width=100% size=1>Julian

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[Danthegorrila]

Hi
tmc has some good ideas along the way we have done ( and a live aboard friend who is an accountant)

We have a Uk based limitted co that rents our properties and pays us a small salery and a dividend, which we use for part of our living costs. The limited co. also has a tax allowance. and paying ni at a small amount keeps our residency and pension fund etc. Its all complex get an accountant!

<hr width=100% size=1>PB