Foreign investors in British property breathed a sigh of relief when the British Budget was revealed on March 7 - the status quo for residential properties was maintained. Tax advisers warn, however, that it is still prudent to carefully structure investments to limit tax liabilities.
All too often, when buying property, Asian investors make the mistake of plunking cash down on the table without first setting up an offshore company. This oversight leaves the investment subject to the British inheritance tax for all properties above the GBP242,000 (HK$2.749 million) threshold, according to Deborah Annells, director of HSBC Republic Tax Consultancy Services.
Ms Annells said there are legitimate ways to avoid tax liability, such as purchasing through an offshore company.
'That takes it off shore for UK tax purposes, because what the Hong Kong person owns is shares in an offshore company,' she said. 'And that is not looked at for inheritance tax purposes to the underlying property in Britain.'
Chancellor (finance minister) Gordon Brown did not announce big changes affecting foreign property investors in what analysts suspect was a deliberately pre-election plan.
The inheritance tax threshold was boosted 3.4 per cent from GBP234,000. There were no changes, however, to the stamp duty, which some analysts speculated would rise following tax increases last year.