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Capital Gains Tax changes for expatriates and overseas buyers brings the UK in line with other global property markets.

The UK government published draft legislation that detailed changes to Capital Gains Tax (CGT) on the sale of properties for overseas and expatriate  investors. This brings changes for the UK in line with other property markets and aligns overseas and expatriate property investors the same as UK resident home-owners.

From 6 April 2015, non-resident UK property investors will be charged on gains made from the sale of their property of between 18% and 28%, this is the same rate as resident home-owners in the UK. The UK government has deemed any UK property owner who spends less than 90 nights in their property to be a non-resident investor and CGT will also be charged on off-plan properties. Other key points arising from the draft legislation are provided below.

The changes mean that non-resident UK property owners will need to consider obtaining a valuation of their property. We work with a number of valuers to assist you in obtaining a recent valuation should you need one.

If you need to clarify any points relating to the changes to the CGT legislation, we advise property investors to seek tax advice from a UK tax specialist with knowledge in this area.

Who will be affected by this new legislation?

From 6 April 2015, CGT will be imposed on disposals of residential UK property by non-resident individuals, trustees, estates and close companies.

Off-plan properties will also be treated as fully completed residential properties, so if a non-resident individual re-sells a property before the completion of a project then they will be liable to CGT on any gains arising after 6 April 2015.

The government has not extended the CGT charge to non-resident institutional investors disposing of shares or units in a collective investment scheme, provided they are ‘diversely held’ and not a mere vehicle used by private individuals to avoid the new tax. Non-resident institutional investors will be subject to a ‘narrowly controlled company’ test and a and a ‘genuine diversity of ownership’ test to ensure individuals are not transferring their interest in UK residential property to a non-resident company in order to escape the tax.

What is the rate of CGT for individuals?

The tax rate for non-resident individuals will be the same as the rates applicable to UK resident individuals. Using today’s tax banding’s, gains under around £32,000 will be liable for 18% charge and any additional gain will attract a charge at 28%.

Non-resident individuals from most countries will also be able to use the annual exemption, currently £11,000, to reduce the CGT payable.

In the unlikely event that a non-resident individual’s property is worth less on 6 April 2015 than was originally paid for the property, the non-resident owners can elect that the gain is calculated using the original base cost.

What is the rate of CGT for companies?

The tax rate for non-resident companies who dispose of residential UK property will be the same as the UK corporation tax rate, which is currently 20%.

Non-resident companies will also benefit from the associated allowances which come with corporation tax.

Can I claim relief using the principal private residence (PPR) exemption?

Non-resident owners of UK properties will be able to claim the same PPR relief as UK taxpayers, so long as they have resided in the property for at least 90 nights that year.

This new 90-night measure will came into effect on 6 April 2015.

What is the reporting procedure?

Where the non-resident individual or company already submits tax returns to HMRC, the reporting of the gain and payment of any tax can be made as part of the self-assessment tax return.

Otherwise, delivery of a return and payment of any outstanding tax must be made within 30 days of the disposal. 

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London Expat Mortgage

CONSULTATION ON WEAR AND TEAR ALLOWANCE

In the Summer Budget 2015 the Government confirmed its intention to introduce measures to improve how landlord’s businesses are taxed.

The new measures which are detailed in the full Consultation Document are designed to provide consistency and fairness in the taxation of rented properties. However, you still have until 9 Octoberto submit your comments and responses to the consultation.

An outline of the new measures is given below and we’ve also produced a handy fact sheet which you can print out:

The changes

The current 10% Wear and Tear Allowance which allows landlords to reduce the tax they pay, regardless of whether they replace the furnishings in their property, will be replaced. From April 2016 landlords will only be allowed to deduct the costs they actually incur for replacing furnishings in their rental properties.

Eligibility

All landlords will be eligible for the relief respective of whether they let their properties on an unfurnished, part furnished or fully furnished basis. However, Furnished Holiday Lets and commercial premises are excluded.

NOTE: The relief will only cover replacing existing furnishings – landlords cannot claim for the initial purchase of furnishings (i.e. when they buy a new property and furnish it for the first time).

How it will work

Landlords will be able to claim for the capital cost of replacing furniture, furnishings, appliances and kitchenware provided for the tenant’s use; such as beds, wardrobes, tables, sofas, fridges, washing machines, carpets, curtains, cutlery and crockery.

However, if the landlord sells the item being replaced, the sale price of that item must be deducted from the purchase price of the replacement and the tax relief can only be claimed on the remainder.

Further, landlords cannot claim for ‘improvements’. If the replacement item is an improvement on what was there before (i.e. a washing machine is replaced with a washer-dryer), then only the cost of a like-for-like replacement can be claimed.

NOTE: Fixtures integral to the building (i.e. baths, toilets and boilers) that are not normally removed by the owner if the property was sold are not included.

The impact

Landlords will no longer need to decide whether their property is sufficiently furnished to make a claim as the relief because applies to all rented properties no matter the level of furnishing.

With the current 10% allowance, the higher the rent, the larger the tax relief. In some areas of the country, 10% is not sufficient to cover the actual costs incurred. The proposal will ensure landlords can claim their actual costs and provide a level-playing field for landlords wherever they operate in the country.

However, there will be a significant administrative and record keeping burden placed on landlords in order to claim the tax relief.

REF: Association of Residential Lettings Agents and HMRC

mortgages for expatriates

Premierexpatmortgages.com: The UK expat mortgage specialists

Welcome to Premierexpatmortgages.com, the official website of Premier Expat Mortgages. Globally renowned as one of the most experienced expatriate mortgage brokers for financing property deals, Premier Expat Mortgages specializes in providing Expat Mortgage UK financing services to international property investors that are based offshore away from the UK as well as global based expatriates. Being located in Hong Kong Premier Expat Mortgages has close associations with the UK based expat lenders, the UAE and Asian expat lenders and we have the expertise to fulfill the expat mortgage financing needs of international property investors.
Premier Expat Mortgages is a completely independent offshore mortgage brokerage that is competent in sourcing ex-pat mortgages from the whole of market enabling us to secure applicants the most competitive mortgage product. As we are recognized as Expat Mortgage financing specialists in UK property, we are capable of finding the most lucrative deals for our clients along with negotiating the most competitive terms to make the process much easier. We work with major lenders such as Royal Bank of Scotland, Lloyds Bank, Clydesdale Bank through to private banks such as Barclays and Investec. We work closely with each of our individual clients and endeavor to tailor the mortgage financing so as to meet and exceed their requirements. Premier Expat Mortgages strives hard to provide expert Expat UK Mortgage financing advice for new mortgage financing and refinancing for expatriates and also in helping them to secure overseas based life insurance. We also provide the most effective solution to refinance any UK property to release funds or help clients reduce their current mortgage rate. .
In addition to expat mortgages we provide expert advice and knowledge of commercial mortgages, bridging finance and secured loans. We work hand in hand with major developers around London such as Berkley Group, Linden Homes, Barratt Homes and Persimmon to provide new investment property in and around Central London to our clients. We also provide unparalleled property management and property furnishing services to clients and interested parties. Premier Expat Mortgages not only makes efforts to help clients with their UK mortgages, but is also proficient in helping clients with international mortgages worldwide.
Irrespective of whether you are taking a UK expat buy to let mortgage into consideration or are a resident returning to the UK and looking for a residential mortgage, Premier Expat Mortgages is the best overseas mortgage broker that can provide you with offshore mortgage financing for your next purchase. No matter what your UK Expat Mortgages financing needs are, we are always ready with our determination and guidance to walk you through the process.
Premier Expat Mortgages in all are here to help you locate your new build property, secure your overseas mortgage financing, help clients secure furnishings for the property and then find the ideal tenant to let your new build or existing property portfolio out to.
Just dial 852 9247 7065 and feel free to consult your next project with our experts. You can visit Mortgages For Expats Based Overseas to get further information about us.

How To Obtain A UK Mortgage When You Are An Expat or Overseas Resident

To obtain a mortgage whilst based overseas for the UK property market isn’t always that easy anymore as clients are dealing with banks that are based overseas generally. These overseas lenders take a more serious view to applications as they don’t always have the means to credit check applicants income sufficiently. There is the important fact that income can be from various sources or that the applicant is self-employed so does not derive income from a standard working salary such as being employed by an employer. Overseas lenders will invariably use a number of ways to assess the finances and the source of income for the mortgage they are underwriting on behalf of the client. Firstly lenders will use a stress tested rental ratio and were are assuming this is a buy to let mortgage as most expats or overseas residents tend to buy for investment purposes. A lender will do this is working out that the rent is 125% of a stress tested rate. At the moment this is 5% or 6% dependent on which lender is approached. If this doesn’t sufficiently cover financing the property the lender will then look at the income and expenditure of the applicant. Lenders generally like to see that all expenditure for day to day living includes all living costs, mortgages, loans and day to day living expenses and doesn’t exceed 60% of the applicants total income. This is known as a debt to income ratio. If this passes the lender will then ask the applicant to supply the below documentation

· Proof of ID (Passport & Drivers Identification Licence) 1 each for joint application·

. Proof of Address(Utility bill or Rental Lease)

· 6 Months Bank Statements

· 6 Months Salary Pay Slips

· Current statements of existing mortgages

· 3 Months bank statements of rental income monies (if any)

· Others upon request(assets, bank deposits, savings, liabilities etc)

The general process to proceed on applying for a mortgage is as follows but will be different for all lenders as they have their own in-house criteria of rules and the way they settle and process mortgages through to the completion stage.

Process for Applying for a Mortgage

1. Prepare application and supporting documents

2. Package and submit to lender

3. Provide further documents lender requires

4. Lender grants Agreement to Lend*(Agreement In Principal) (3-4 Weeks)

5. Agreement In Principal sent to client

6. Client signs and returns Agreement In Principal top the lender

7. The lender creates a mortgage account for the clients mortgage payments and rental income to be deposited

8. Client pays lender fee

9. The lender instructs valuer to value the property

10. Client pays valuation fee

11. Valuer surveys property

12. Valuer returns valuation report to lender

13. Lawyers instructed

14. Lawyers performs searches and prepares Report on Title

15. Lawyer submits Report On Title to lender

16. Lender releases funds to lawyers

17. Lawyers exchanges funds and title

18. Property Completed

19. Full process 8 to 12 weeks

Clients will need to be aware of the tax implications and stamp duty requirements which can be found on the below websites

https://www.gov.UK/stamp-duty-land-tax/overview

*(AIP) Agreement In Principle to lend

https://www.gov.UK/topic/personal-tax/capital-gains-tax

Gerard Ward has experience arranging UK mortgages for 15 years and assists overseas purchasers and UK expatriates buying in the United Kingdom. I can also source mortgages in various other countries.

When Will Interest Rates Rise

The likelihood of a base rate increase has risen; as of last week, markets were pricing approximately a 50% probability that the Bank of England’s Monetary Policy Committee (MPC) will vote for a 0.25% interest rate rise in November. This would boost the base rate to 0.5%, and whilst this is only a small increase, the rate rise would be particularly significant as it would be the first time UK interest rates have risen for over a decade.

Mark Carney, Governor of the Bank of England and Chairman of the MPC, has also hinted that an interest rate rise is imminent. During a recent BBC interview, Carney stated: “We can see that in coming months if the economy continues on this track, it may be appropriate to raise interest rates.”

It’s impossible to predict an interest rate rise for sure—and it can also be difficult to wade through the rafts of newspaper headlines and gain a clear sense of what is likely to happen. We sat down with Emma McHugh, Economist at C. Hoare & Co., to get her insight.

From the September minutes of the MPC meeting and subsequent comments from its members, we sense a change of mood at the Bank of England and anticipate some form of tightening in policy over the coming months.

This tightening could be a reduction of the Bank of England’s stock of bond purchases or raising the base rate. The resilience of the UK economy since June 2016 has caught the Bank of England off guard and with inflation expected to run above target in the near term, there are reasonable grounds for the Bank of England to reverse its measures brought in last August.

Changes to Stamp Duty

On December 4th 2014 stamp duty on property purchases was reformed by the Governement.

 

At the time the Chancellor George Osborne stated around 98% of purchasers in England and Wales would pay less after stamp duty reform. Changes to stamp duty meant people who buy homes for under £937,000 would pay less in tax when compared to the old system.

From April 2016 a 3% SDLT surcharge has applied to purchases of buy to let property and second homes. In Scotland a similar LBTT 3% surcharge applies to additional property transactions from April 2016.

Old Stamp Duty System

With the old system before December 2014, stamp duty was considered to be a “slab tax” where higher rates were incremented and applied to the whole property purchase price.

The old system meant there were sudden increases in stamp duty liability as the purchase price rose above the next thershold.

This had a negative impact for both purchasers and vendors with costs increasing or values artificially dimishing around each threshold.

New Stamp Duty System

Since December 2014 the tax system has become “progressive” and rate increases are applied between stamp duty thresholds only.This means stamp duty rate increases are no longer applied to the whole purchse price.

Because of this progressive nature, the new system has been compared to income tax. The updated stamp duty thresholds range from £125,000 to £1.5 million.

Changes to Stamp Duty in Scotland

Following on from changes to Stamp Duty in England Wales and N.Ireland, stamp duty in Scotland was reformed on April 1st 2015. Stamp duty in Scotland has been replaced by Land and Buildings Transaction Tax (LBTT).

LBTT in Scotland works in a very similar way to Stamp Duty in the rest of the UK. LBTT is a progressive tax with slightly different thresholds ranging from £145,000 to £750,000.

Buy to Let and Second Homes

Levels of stamp duty for buy to let property and stamp duty for second homes has now changed.

Changes were announced by the chancellor in his 2015 Autumn statement and came into effect from April 2016. The stamp duty changes introduced a significant rate increase for property being purchased in addition to a main residence.

From 1st April 2016 a 3% surcharge has been applied to buy to let and second home purchases with a new lower initial threshold of £40,000. Given that the vast majority of second home purchases fall outside this threshold, more transactions will now attract stamp duty than in previous years.

Anyone who purchases a property in addition to their main residence is now liable for the surcharge even if the property is not let out.

In Scotland LBTT rates have also increased for purchasers of second homes. The 3% LBTT surcharge was introduced at the same time as the rest of the UK.

To compare SDLT calculations before and after April 2016 please visit our buy to let stamp duty page.

Key Dates for Exchange & Completion

The higher SDLT rates apply to purchases of buy to let and second homes with a completion date on or after 1st April 2016.

If contracts were exchanged before the Autumn statement on 25th November 2015, but the completion date was after 1st April 2016, the higher rates should not apply.

If exchange of contracts was after 25th November 2015 then the higher rates apply if the purchase didn’t complete before 1st April 2016.

Budget 2017

No major stamp duty changes were announced in the spring budget on March 8th 2017.

Is the global property bubble ready to burst?

Residential global property has arguably been the most exciting investment of the past eight or nine years, but lately the fun has been draining away.

House and apartment prices have been driven sky high by rock bottom interest rates and there are growing signs that they cannot go any higher.

Affordability has been stretched as far as it can go. Buyers are reluctant to part with their money at these levels. The days of double-digit annual house price increases appear to be over.

The question now is whether the market is merely slowing, or whether it could go sharply into reverse. Is this a bubble, and if so, could it burst?

Nothing lasts forever. London was the world’s No 1 property hotspot, but lately the luxury end of the market has slipped.

Completed sales of newly-built flats in prime central London areas fell 41.4 per cent across 2016, according to figures from London Central Portfolio, while average prices for new builds also fell 8.7 per cent to £1.9 million (Dh9m).

The very top end, for houses worth £5m or more, was worst affected with a 57 per cent fall in new build sales. However, prices across prime central London still rose 3.7 per cent, once sales of existing stock were also taken into account.

The pattern of slowdown can be seen around the world in Knight Frank’s latest Prime Global Cities Index, which tracks the performance of luxury residential prices across key global cities for the period of March 2016 to March 2017.

Its survey for the first quarter of this year showed that global property hot spots remain, with luxury prices in major Chinese cities Beijing, Shanghai and Guangzhou up on average 26.3 per cent, while in the Canadian hot spot of Toronto, prices grew 22.2 per cent.

In Seoul, prices grew 17.6 per cent, Sydney and Stockholm registered price rises of 10.7 per cent, and Berlin, Melbourne, Vancouver and Cape Town grew between 7 and 9 per cent.

However, outside this buoyant top 12, price growth was in the low single digits, with a third of the 41 cities featured suffering a drop.

Worst performers were Istanbul (minus 8.3 per cent), Moscow (minus 7.3 per cent), Zurich (minus 7 per cent), London (minus 6.4 per cent) and Taipei (minus 6.3 per cent).

Taimur Khan, a senior analyst at Knight Frank, says despite the slowdown there is no need for investors to panic. “This is a story of moderation rather than underperformance, with price growth in single digits.”

Tighter regulations have slowed growth in some cities and local factors are at play, he says. “In Beijing and Shanghai, second home buyers rushed in ahead of the new rules insisting that investors put down larger deposits, temporarily driving up prices. Growth now looks more sustainable.”

Mr Khan says that the United Kingdom government has introduced more than 20 changes to property taxation, either direct or indirect, since 2010. “The latest example was in April 2016, when it levied a 3 per cent surcharge on second home and investment purchases in England and Wales, slowing demand. However, in recent months sales volumes have been trending up.”

Mr Khan says a lack of supply in Toronto has created a bottleneck, driving up prices, particularly at the prime end. “Other financial centres such as New York and Singapore have enjoyed significant price growth, but are now slowing.” He says there are still plenty of opportunities as owners and second home buyers seek education, lifestyle and leisure opportunities in the major global cities. “High net worth investors are attracted to Sydney and Melbourne, while Berlin is booming due to its growing tech industry.”

Different cities are at different stages of the market cycle, he adds. “Affordability is stretched in some places and for some buyers but there is also a shortage of supply, and this is what is underpinning the market. Any price dips are likely to be met by a wall of demand.”

Faisal Durrani, the global head of research at Cluttons, and an expert in the Middle East and Africa property markets, also says global property is slowing while ruling out the prospect of a crash. “This is no bubble bursting, just a gentle deflating.”

UAE outlook

Investors in luxury property face a catch-22, as that is where values are falling fastest in the UAE says Mr Durrani. “We are seeing this pattern in Dubai, Abu Dhabi, London and elsewhere, where investors are reluctant to part with their money.”

Mr Durrani says that almost a decade after the financial crisis many economic problems have just become more complicated. “The oil price has collapsed, which has hit the Middle East. The Trump presidency is causing anxiety as it intervenes in Syria, North Korea and Iran, while the US economy faces domestic economic challenges. Brexit looks set to drag on and on. Everywhere you look, people’s political views are becoming more polarised. There is little middle ground, and this makes investors nervous.”

In Dubai, prices in Burj Khalifa are down more than 20 per cent in the last 12 months, while villa and apartment prices in Palm Jumeirah are also falling, he says. “The priciest areas are coming off worse, including Emirates Living, The Lakes Community and Arabian Ranches.”

However, Mr Durrani says prices are stable in downtown Dubai thanks to its attractive location and shrinking availability. “In 2015, there were 3,000 off-plan launches in downtown. Last year there were just 1,400 and opportunities to buy first-hand are starting to diminish as volumes fall. International City and Dubai Discovery Gardens are also holding steady.”

The Dubai market is also throwing up local investment opportunities. “The biggest is in affordable accommodation for low to mid-income earners, which is in short supply, and can generate yields of between 6 and 8 per cent a year,” he says, adding that affordable housing is now limited to older parts of Dubai, such as Karama and pockets of Deira and Bur Dubai, as well as International City and Discovery Gardens in new Dubai.

In Abu Dhabi, Mr Durrani says prices in Saadiyat Island are down 25 per cent over the year, with rents down one- third. “Demand at the top of the market has dried up as there are now fewer senior level jobs, and residents are losing their living allowances or seeing them cut. Job insecurity is growing and people are downsizing to save money. Demand for luxury rentals has therefore diminished significantly.”

Many Middle Eastern investors are now looking farther afield to Toronto as a result, he adds.

“Canada offers high-quality education and luxury high-end properties. Prices are rising but property is still relatively affordable, starting at US$600 per square foot compared to, say, £5,000 -plus in London’s Mayfair. This is a massive difference and Canada is a welcoming environment for investors from the Gulf.”

Craig Plumb, the head of research at global real estate experts JLL Mena, says residential prices in the Middle East and North Africa (Mena) have been generally falling for the past two years, but investors shouldn’t panic. “This is nothing like 2008-09, there is no bubble waiting to burst.”

Prices have declined by between 5 per cent and 15 per cent since mid 2014, he says, with Dubai leading the way. “Dubai acts as a bellwether for the region. It is the first to react, with others lagging 12 to 24 months afterwards.”

Mr Plumb believes the Dubai market is now close to the bottom of its cycle. “Prices have been largely flat now about 12 months as the market has bobbled along the bottom. We expect some increases towards the end of 2017 although it won’t be significant, less than 5 per cent in most locations.”

He says the story varies across Mena but prices generally are likely to soften further over the rest of the year.

Global outlook

Yolande Barnes, who heads the World Research Team at global real estate services provider Savills, says the global real estate market recovery peaked in 2015 and many cities now look fully valued.

Yet she remains optimistic, anticipating strong demand in major cities in the Asia Pacific, western Europe and the United States.

The recovering Chinese economy bodes well for Asia Pacific, and she expects India to become a more important regional player as its economy is forecast to grow significantly, boosting Singapore.

However, many European cities now look fully valued and increasing uncertainty around Brexit, Italian banking and Greek debt default has subdued interest. “Activity is down 21 per cent overall, despite pockets of strong city performance, and down 38 per cent in the UK,” says Ms Barnes.

While UK hot spots such as London, Oxford and Cambridge look pricey, cities such as Bristol, Manchester and Glasgow may offer opportunities. “As do lesser known locations such as Canterbury, Bournemouth and Leamington Spa.”

In the US, mature city real estate markets such as New York and San Francisco are slowing but there is action elsewhere, Ms Barnes says. “Now it is the turn of the second-tier US cities to shine as economic growth has buoyed new industries in Nashville, Portland, Austin, Philadelphia, Ithaca, Raleigh and Durham.”

Strong demand from domestic institutions and overseas investors has sustained US transactions levels, which rose 5 per cent in 2016 to buck the global trend.

Ms Barnes says the bull market in prime real estate is over, especially with the US Federal Reserve looking to nudge up interest rates. “Future investment returns will be driven by rental growth and there is no reason to expect price falls providing rents remain steady.”

In an age of geopolitical and economic uncertainty, real estate has taken on a new role. “It is increasingly seen as a stable, real-world asset with safe haven income-producing attributes,” says Ms Barnes. If the experts are correct, the global property surge is over. However, few expect a crash, provided interest rates stay relatively low, as demand remains strong and top-end property in short supply.

“Just because things look expensive does not mean there is a bubble ready to burst,” says Ms Barnes.

The days of making fast money are over. However, sensible long-term investors should continue to profit from modest rises in rents and house prices. “We expect to see a much closer relationship between rental growth and capital growth. Progress should be steady, but not spectacular,” Ms Barnes adds.

The property market may have plateaued but there are still opportunities if you look for them.

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