11th April 2007 10:24
For buyers wanting to invest in property abroad but avoid restrictive inheritance laws in countries like France, the idea of buying property through a company seemed to be the perfect solution. However, many British investors who have set up companies for property acquisition have encountered unexpected tax charges.

The benefit-in-kind tax is usually applied to non-monetary benefits received from an employer rather than from a private business. Nevertheless, many investors have found themselves liable for charges based on the notional property rental value for the duration of their stay. This issue has provoked two recent legal battles contesting the taxation and has caused much confusion amongst investors.

Changes in this years budget appear to have resolved the situation. Chancellor, Gordon Brown announced in his final budget that individuals who buy a property abroad through a private company will not incur a benefit-in-kind tax charge if the property is used for private purposes.

In addition, the rules will be retrospective, meaning that those who have paid the tax will be able to claim their money back. Although the legislation has yet to be published, the outlook seems favourable for overseas property investors. Investors are advised, however, to seek expert financial advice when buying property through a company to avoid getting caught out by details in the legislation.

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