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Budget tax tips for overseas property investors
June 25, 2010

Erna Low Property Announces Top Five New Budget Tax Tips for Overseas Property Investors

George Osborne’s new Emergency Budget 2010 may have sparked controversy amongst pundits in the travel and property industry, but Erna Low Property’s CEO, Joanna Yellowlees-Bound thinks there is room for optimism between the budget lines.

There is as much to be relieved about in the new budget announced Tuesday as there is to be concerned about, according to Joanna Yellowlees-Bound, CEO of Erna Low Property, one of the UK’s leading property specialists to France.

“Pre-Budget reports suggested that tax could have hit 50%, so the flat 28% is a relief by comparison and less complicated for new investors. It is also very good news that the threat by the previous government to remove the tax benefits of furnished holiday properties has been scrapped, so the market can still be very lucrative for the savvy investor. In addition to this there is a further window of opportunity to improve your furnished holiday lettings property as there is now an annual investment allowance of £100,000 – which will reduce to £25,000 from 2012/13.”

Yellowlees-Bound believes the key to success in the overseas property market given the new tax structure is a return to the basics of sound long term investing versus short term speculation. She is particularly buoyant about the French property market.

“With France as the world’s number one tourist destination, attracting over 60 million tourists each year, the French summer and ski property market continues to grow steadily and is set to soar again over the summer months. Investments like our blue-chip St Endreol, Cavalaire and leaseback developments in the Cote d’Azur as well as Arc 1950 in the French Alps are excellent examples of how new investors can quickly benefit from rental income and the tax advantages still on offer.”

To help guide potential investors’ decisions, Erna Low Property has announced its top Five New Budget Tax Tips for those considering investing abroad:

1) Do the UK Tax Maths -- while CGT will rise from 18% to 28% for higher and additional rate taxpayers, there are still many benefits to investing in foreign property as long as you are fully informed and aware of the tax implications to you as an individual, business or entrepreneur. Make sure you understand the foreign exchange tax risk and investigate the advantages of forward buying. The pound is predicted to continue upwards which again will be a huge plus to buying your ideal property.

2) Investigate The Local Tax Structure -- England may be raising VAT from 17.5% to a whopping 20%, but the French government is currently offering a leaseback purchase scheme allowing investors to waiver their 19.6% VAT on the sale price of any property managed there. Understanding how the local tax system works and weighing the pros and cons in terms of double tax relief in the UK is a must before you invest in foreign property.

3) Invest for the long term, be happy with the short – when investing in a buy-to-let property, focus on the rental yields that can be achieved year to year. Capital gains are less important if you focus on the benefits of those yields rising over the years.

4) Know your exit strategy – How long do you intend to invest? Where do you want to live long term? Do you want to hand down your property to your children? All of these have ramifications for your investment decisions now. Knowing your end game will show you the path you need to take based on the new budget rules and will make it easier to spot the best investment opportunities for you in the long and short term.

5) Talk to the experts – create your own team of property advisors, independent financial consultants and tax experts to guide your decisions.

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