Overseas rental - tax options

jimmyjoe110

Hi,

I appreciate I am likely to require the advice of an accountant here but I was after advice from anyone with similar experience.

I have a holiday let in Bali due to complete shortly which will be a short term rental. Standard tax there, without establishing an Indonesian based company, is 20%. I am a 40% tax payer and due to a double treaty will owe the UK a further 20% of any profit (less expenses). 

Is setting up a UK business an option to save this further 20% hit, or will doing so result in similar costs through tax hits on dividends etc or however I end up moving the money across to my account in the UK? Many thanks in advance.

Bookworm105

"setting up a business" 
so you mean transfer the ownership of the property to a UK ltd company owned by you?

pointless,
- immediately triggers Capital Gains Tax based on the transfer value minus purchase cost. Typically that wipes out other tax saving on the rental profits for many years.
- you might be 1 or 2 % better off by the time corporation tax and higher rate dividend tax has been paid anyway
- incurs ongoing admin costs for running the company meaning you might be left with zero "saving"
- owning via a company is a good way to shelter profits from tax, by which i mean you leave the money in the company, not take it out as personal income, until your personal tax position changes (ie you are no longer higher rate) 

jimmyjoe110

Oh ok, I was hoping it could halve the tax paid but it sounds like it’s not worth looking in to any further based on that. Would it have been worthwhile if I’d put it in the business name from the start? 

Bookworm105

jimmyjoe110 said:

Would it have been worthwhile if I’d put it in the business name from the start? 

purchasing and then letting residential property as a Ltd company can be very tax advantageous compared to personal ownership & letting under the current tax regime.

however, the usual stumbling bloc for that is where does the company get the finance from to buy it?
Lenders not too keen on start up companies with no trading record and no cash

Can I Buy Property Through My Limited Company | House Director (phillips-law.co.uk)