BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 109
The interrelationship of each of these taxes and the formalities which need to be complied with are complex and careful consideration needs to be given to their application to the acquisition of
any specified real estate. By way of example, the following table compares ownership by an offshore company with personal ownership.
Ownership by Offshore Company
Ownership by Individual
ATED
Yes, annual charge, depending on value
No
CGT
No
Yes, on disposal on gains. At rates of 18% or 24%. Relief may be available if property used as main residence
CT
Yes, rental income (mortgage interest is deductible) and on disposal on gains at up to 25%. No main home relief Participators in offshore company have IHT exposure (40% on death, subject to exemptions and reliefs)
No
Yes, immediate exposure (40% on death, subject to exemptions and reliefs) Rental income taxed at 20%/40%/45%. No deductibility of mortgage interest Stepped rates between 0% and 12%. Higher rates apply to purchases of residential buy-to-let and second residences. Additional rates apply to purchases by non-UK residents
IHT
IT
No (see CT above)
Potentially at higher flat 17% rate if purchase price >£500,000. Additional rates apply to purchases by non-UK residents
SDLT
9. Expenses The buyer will have to meet at least the following additional expenses at completion of the transaction: • Land Registry fees ranging from £20 to £1,105, depending on the value of the real estate. This is less than the registration or cadastral fees payable in most other European countries. • Legal and other professional fees, which are generally agreed at levels to reflect the purchase price and professional input. These fees will bear VAT at the then current rate (currently 20%), even for overseas investors. Each party usually
meets its own professional advisers’ fees unless agreed otherwise. A tenant who is subletting or transferring the lease will usually be required to pay the landlord’s professional fees for the consent to the subletting or transfer. • The seller, not the buyer, pays the selling agent’s fees. These typically vary from 1%- 3%, depending on whether the real estate is commercial or residential, with fees for auction sales generally higher than for private sales. Payment of the agent’s fee is normally conditional on completion of the sale.
ILN Real Estate Group – Buying and Selling Real Estate Series
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