Non UK citizen buying UK property and tax

[jimbob70]

I have a friend who is a HK citizen but would like to buy a UK property to rent out and maybe eventually sell.

Assuming they can get a mortgage here, what would be the tax implications?

Would they need to pay UK income tax from the rental income?
If they sell, would they need to pay capital gains?

Grateful if anyone can share their experience.

thanks

[dipper]

http://www.hmrc.gov.uk/cnr/nrl1.pdf

[Katanga]

Citizenship is irrelevant.

Owning the property in the UK and sourcing income from it means you have to pay tax on it. Your friend will have to do annual tax returns. Highly unlikely that after the deductions allowed, the personal allowances etc, that you will have any tax to pay. Unless of course your friend is buying a GBP1m+ property for cash and renting out for over GBP1k per week.

[hongkongperson]

Citizenship is irrelevant.

Owning the property in the UK and sourcing income from it means you have to pay tax on it. Your friend will have to do annual tax returns. Highly unlikely that after the deductions allowed, the personal allowances etc, that you will have any tax to pay. Unless of course your friend is buying a GBP1m+ property for cash and renting out for over GBP1k per week.

OK, so this is a few months old...but I just had to say hang on a second...

Citizenship IS relevant. If you are not an EU citizen, you do not get your personal allowances as a non-resident of the UK. So, if you are from HK, with a HK passport, and resident in HK, you are not entitled to claim UK personal allowances.

[PDLM]

As hongkongperson says - the liability to tax is independent of citizenship, but only certain non-resident people get the personal allowance. They are listed on the form linked above by dipper (it's slightly broader than just EU citizens).

[hongkongperson]

^^ slightly broader than just EU citizens, but it's not exactly of any relevance here as the person is a HK citizen who is (probably, but not definitely) resident in HK.

I was not going to list the ifs, buts, ands to the general rule, as it just gets too lengthy and delves into DTAs etc.


One advantage is that so long as the person is a non-resident of the UK (for 5 complete tax years, not an issue if he's never lived there) and sells when non-resident, there is no UK CGT, which is why the UK is attractive to foreign property investors who don't have to pay CGT in their home countries on the sale of foreign assets/home based assets.

[Rayzilla]

Based on what I am reading above, it does not work the same way as it does in Canada. I would have expected the tax rules on this fact pattern to have similar results but it doesn't sound that way.

For example, if the person bought a house in Canada and rented it out, personal tax credits that residents are eligible to claim, are not available to non-residents. And taxes would have to be withheld on the rental income. Deductions relating to the home would be allowed but not the personal tax credits.

Sorry if this sidetracks on the OP's question. I just thought that it was interesting.

Continue on...

[HowardCoombs]

Citizenship IS relevant. If you are not an EU citizen, you do not get your personal allowances as a non-resident of the UK. So, if you are from HK, with a HK passport, and resident in HK, you are not entitled to claim UK personal allowances.

You sure about this?
I'm a Canadian, HK resident, UK property owner.
I get the deduction every year (its around 6000GBP or thereabouts).

[PDLM]

From http://www.hmrc.gov.uk/cnr/nrl1.pdf

Up to 6 April 2010 Commonwealth citizens
were automatically entitled to UK personal
allowances. From 6 April 2010 they must satisfy
one of the other conditions listed above to qualify.

Having said that, it does appear from the above document that citizens and/or residents of many countries, including China (but not Hong Kong), do get some allowances at least.

[hongkongperson]

You sure about this?
I'm a Canadian, HK resident, UK property owner.
I get the deduction every year (its around 6000GBP or thereabouts).

It's currently at around 7.5K (the personal allowance).

You are eligible up to 2009/10 to claim it, but from 2010/11 you are not. HMRC excluded commonwealth citizens. It is only (as a general rule,there are ifs and buts the the likelihood that anyone here will fall into them is very very low) EU citizens who can now claim as non-residents under UK domestic tax legislation...however the DTA that the UK and your country of residence and sometimes nationality may allow you to claim the UK personal allowance as a non-resident. DTAs always override domestic legislation.

If you are HK tax resident and a Canadian citizen, you're not allowed to claim it from 2010/11 onwards. You would be allowed if you were Canadian tax resident though.

I'm 150% sure on this.