Autumn Statement 2022 - Particular points for overseas investors in UK property

Short term political turbulence

With global political and economic turmoil as a backdrop, recent headlines have led to a perception that the UK is a country which is experiencing a particular period of uncertainty. However, much of that uncertainty has pleasingly calmed since the appointment of Jeremy Hunt as Chancellor on 14 October 2022, followed by Rishi Sunak taking office as Prime Minister on 25 October 2022.

Additionally, confirmation that many of the surprising tax announcements made by the previous Chancellor, Kwasi Kwarteng, in his ‘Growth Plan 2022’ have been – or are soon to be – abandoned has already gone some way in re confirming investor confidence in the UK.

The UK’s attractive tax regime

The UK remains an attractive jurisdiction for investment in real estate. In particular:

• the headline tax corporation tax rate (from 1 April 2023) will be 25%. While higher than the current rate of 19% the rate is comparable to other European countries;
• it continues to be the case that real estate transfer taxes are not chargeable on the sale or acquisition of SPVs whose value is attributable to UK property;
• the UK’s tax advantaged regime for holding UK real estate (Real Estate Investment Trusts, commonly known as REITs) is well-established, and the government has recently been capitalising on its increasing popularity by relaxing the conditions for entry to the regime. For those investors that can invest through REITs this will typically drop the UK tax rate from 25% to 15% on income and gains from investment properties;
• the sophisticated machinery of the UK tax landscape means that holding property in offshore structures (for example, Jersey and Guernsey Unit Trusts) is both favourable and achievable from a tax perspective;
• the UK has concluded a wide suite of tax treaties with other jurisdictions for the avoidance of double taxation.