During the coronavirus pandemic the UK property market has boomed, with a vast number of properties being sold in record time, often for substantially more than the asking price.
The Chancellor’s introduction of the Stamp Duty Land Tax (SDLT) holiday in July 2020 was no doubt an incentive, but for many buyers the driving force behind their decision is simply that they have re-revaluated where they want to reside as they adapt to the ‘new normal’.
This is true for UK residents who are looking to relocate, but is also becoming increasingly popular for non-UK domiciles who have found themselves caught in the UK due to the pandemic and are now considering putting down roots here.
Non-domiciled individuals residing in the UK can make use of the UK’s remittance basis to limit their exposure to UK tax, as non-UK income and gains are only taxed if they are brought into the UK.
At face value this can go a long way to simplifying a person’s tax affairs, however the landscape can change dramatically and become complicated very quickly where an individual looks to remit significant sums to the UK and if their affairs have not been structured in the correct way.
There is a big risk that non-UK domiciles looking to use non-UK funds to purchase property in the UK could inadvertently fall foul of the lesser-known provisions of the remittance basis, triggering additional tax charges on top of the SDLT due.
This additional cost is not often factored into the decision-making process when buying the property and could be construed as a hidden cost for those looking to buy property or invest in the UK.
In the Budget this week it is anticipated that the Chancellor will unveil further details of a fund designed to boost foreign investment in the UK. This fund is intended to encourage investment from global companies to support the UK’s critical and innovative industries, but it is unclear whether there will be incentives for individual investors.
If so, could these incentives give rise to an increase in the number of non-UK domiciles triggering these remittance basis rules, and could these hidden charges dampen the incentive to invest in the UK?