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US Buy to Let Investments and UK tax

p1a0clonpv18144iv2n1dtsne5dAs the old saying goes, two things are certain in life, death and taxes. However, when you buy overseas property and receive an income from it (whether you bring that back to the UK or not) the tax implications can be uncertain. Practically all our UK clients ask us how making money earned from US investments is going to affect their tax bill.

As part of our commitment to providing our clients with exceptional pre and post purchase client services we have teamed up with St Alban’s based accountants Ad Valorem who are offering PCG Invest clients a free initial consultation.

Of course you can take a look at the HMRC website. Here is what HMRC say – it is slightly confusing

We suggest that all our clients take expert advice as each situation can be very different and no one wants to pay too much tax or get in to trouble with the tax man.

How does owning a US property affect my tax bill?
It all depends on your circumstances; we have a Double Taxation Treaty with the US, introduced to eliminate the double taxation of income or gains arising in one territory and paid to residents of another territory. Double Taxation Treaties work by dividing the tax rights each country claims by its domestic laws over the same income and gains.

How can Ad Valorem help PCG clients?
They look specifically at UK tax liability, and as with any tax issues the answer is always “it depends” on what you are doing with the proceeds of the investment. If the income stays in the US it won’t have any effect on UK tax liability. However if you are bringing money back to the UK and depending on what you want to do with the money, Ad Valorem can advise on the best way of doing it. If for example you have UK investments, it will affect that income when you add your US income to your UK profits.

What happens when I want to sell my property?
Each case is different of course and you would need specific advice on what happens to money you receive from a sale when you bring it back into the UK.

It all depends on what vehicle you have used to make the investment and where it will be paid back into (personal, limited company, trust etc). It is also dependent on where the money you have invested has come from, where it is personally or through a UK limited company, or trust, or whether you have done through an LLC in the US.

Will it affect my pension/estate planning?
Yes, if your US portfolio is part of your estate it will impact your pension/estate planning.
Everyone’s tax situation is different and it is absolutely worth having that free initial conversation with the team at Ad Valorem.