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Old 16.12.2009, 14:01
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Very confused about tax on UK property

I am now seriously confused about whether or not I should be paying tax in Switzerland on property I own and rent out in the UK. I have looked on one thread which tells me that no, I should not be being taxed here, due to some dual taxation law, yet on another thread it says that I should be taxed on anything UK based I declare.

So what on earth is the answer? We paid a pretty big tax bill last year on what seemed to be our UK fortune and revenue, and now I am not sure whether our tax has been miscalculated by our accountant. So, no disrespect to anyone on this forum, but is there non-anecdotal, hard, factual evidence to support which one of the above is correct? I am obviously hoping for the former, but really do need to know as I am currently filing my latest tax return and am looking at another whopping bill!! I am taxed at source on my Swiss income if this has any bearing on things.
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Old 16.12.2009, 14:20
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Re: Ver confused about tax on UK property

Real estate income and wealth are taxable where the real estate is located. You have to declare it in your CH tax return for tax rate purpose only, as your income and wealth (except foreign real estate) is taxable in CH at the rate that would be applicable to your worldwide income and wealth. Any other way of proceeding is wrong!

Though if you are taxed at source and if you earn less than CHF 120'000/year, you don't have to file a tax return... and therefore to declare your UK property.

Happy tax filing!
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Old 16.12.2009, 14:22
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Re: Ver confused about tax on UK property

i've also seen contradicting information.

on the one hand, as a basic principle, CH taxes residents on worldwide income and assets.

but i've seen one thing which says foreign real estate is exempted and another which says foreign real estate is only used in determining the tax rate.
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Old 16.12.2009, 14:36
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Re: Ver confused about tax on UK property

A very good link here that explaines it all : http://www.which.co.uk/advice/tax-on...road/index.jsp
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Old 16.12.2009, 14:40
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Re: Ver confused about tax on UK property

I can answer at least part of the question with certainty;
1) Wealth tax; you have to declare the value of your UK assets, this is then added to the total of your Swiss assets to set the rate (which escaltes as the total rises) that is applied to tax your Swiss assets only.
2) UK income tax; If you receive rental income in the UK then the UK tax authorities will tax this income in the UK (net of UK personal allowances and permitted expenses related to the rental).
Hope this helps
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Old 16.12.2009, 14:42
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Re: Ver confused about tax on UK property

If the income from rental in say, the UK, is declared and taxed there, then do not declare the income again in Switzerland. A double taxation agreement mean you are not taxed twice.

However, the value of the property should be declared, especially if you ever want to bring the proceeds of sale to CH, as this is wealth which is liable to very modest tax here. If you don't declare the value and suddenly have half a n million in your Swiss bank account the tax people here will want to know where it came from and back tax it.

This is the advice I was given some years ago by the town of Zurich tax office...
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Old 16.12.2009, 18:07
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Re: Ver confused about tax on UK property

Swiss-UK Double Taxation Treaty
http://www.pwc.ch/de/dyn_output.html...tax.html#pwc03

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If the income from rental in say, the UK, is declared and taxed there, then do not declare the income again in Switzerland. A double taxation agreement mean you are not taxed twice.

However, the value of the property should be declared, especially if you ever want to bring the proceeds of sale to CH, as this is wealth which is liable to very modest tax here. If you don't declare the value and suddenly have half a n million in your Swiss bank account the tax people here will want to know where it came from and back tax it.

This is the advice I was given some years ago by the town of Zurich tax office...
Swiss residents must declare all off-shore income and indicate that tax was paid in another jurisdiction. Where a DTA is applicable, the Swiss tax officers will adjust the Swiss tax liability accordingly.

This also because the off-shore income, even if not taxable in CH, nevertheless bumps up the pertinent tax rate on Swiss income.

Good luck on your store opening
i m certain you will get plenty o peoples
from the forum and peoples that live in Thun
to buy in your shop.
Maybe ask if you can put flyer at the British Consulat
Take care

Another idea,maybe if you can put lyers
in the school that teach English in Switzerland
as there is a good chance peoples that learn English
will like English Products!
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Old 16.12.2009, 18:19
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Re: Ver confused about tax on UK property

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If the income from rental in say, the UK, is declared and taxed there, then do not declare the income again in Switzerland. A double taxation agreement mean you are not taxed twice.
THat's not quite right - you need to declare it but it's a series of plusses and minuses on the form. You are not taxed on the actual income twice but the income is entered on the swiss tax form and is used to calculate your total income rate etc. The actual income is taken off again later on in the form (along with capital value overseas) leaving you just with a higher rate.

CH: Tax rate based on (swiss income + uk income) applied to (swiss income)
UK: Tax rate based on (uk income) applied to (uk income)
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Old 16.12.2009, 18:33
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Re: Ver confused about tax on UK property

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If the income from rental in say, the UK, is declared and taxed there, then do not declare the income again in Switzerland. A double taxation agreement mean you are not taxed twice.

However, the value of the property should be declared, especially if you ever want to bring the proceeds of sale to CH, as this is wealth which is liable to very modest tax here. If you don't declare the value and suddenly have half a n million in your Swiss bank account the tax people here will want to know where it came from and back tax it.

This is the advice I was given some years ago by the town of Zurich tax office...
I would say that was correct.

Technically your tenants in the Uk should be deducting tax on the rent they pay you and paying it to the Uk government. I would never advise anyone to do that though.

AbFab is also correct that you should declare your house and mortgage on your tax return so that you pay tax on the net for wealth tax in Switzerland.

I was advised that if I had a UK home not to declare the asset in Switzerland for wealth tax reasons. The problem would be if you wanted to bring that money to Switzerland at a later date.
However, I would advise that if you sold your house in the UK to put the sale proceeds in a UK Limited Company (it remaining dormant) in a high interest deposit account in a safe bank. If you need those monies at a later date, the company can lend you those monies.
I think eventually a wealth tax will be introduced in the UK and this would be a way of getting around it anywhere in the world.
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Old 16.12.2009, 20:09
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Re: Ver confused about tax on UK property

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I can answer at least part of the question with certainty;
1) Wealth tax; you have to declare the value of your UK assets, this is then added to the total of your Swiss assets to set the rate (which escaltes as the total rises) that is applied to tax your Swiss assets only.
2) UK income tax; If you receive rental income in the UK then the UK tax authorities will tax this income in the UK (net of UK personal allowances and permitted expenses related to the rental).
Hope this helps
Absolutey correct, the value of your (worldwide) immovable assets (e.g. House ) plus income is used to determine your tax rate so declaring it could mean you pay more (I calculated an extra £100 for me annually but then again I only have one average house) in taxes which I guess is not as big a loss as the potential fine you could face for avoiding a declaration in the first place by suddenly having a million following a house sale (like abfab said). As for UK rental income you could apply to hmrc to be considered as a non resident landlord (I know coz I'm following the same process and found out on this forum courtesy of mariezug) and this means you can declare your rental income here instead (though the tax consultant seemed to imply that the Swiss authorities don't care but why take chances
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Old 16.12.2009, 21:38
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Re: Ver confused about tax on UK property

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As for UK rental income you could apply to hmrc to be considered as a non resident landlord (I know coz I'm following the same process and found out on this forum courtesy of mariezug) and this means you can declare your rental income here instead (though the tax consultant seemed to imply that the Swiss authorities don't care but why take chances
That's not the case! The non resident landlord scheme is a way to have HMRC give you the option not to have the tax deducted at source. It is STILL LIABLE in UK, and is not some sort of choose where you want to tax it scheme.
See http://www.hmrc.gov.uk/CNR/nr_landlords.htm

Plus you may well get UK tax allowances (I do) so any rental income is only taxed on the balance over the tax free allowances. You can possibly also split the income with your wife if the house is joint owned, which means two sets of allowances and the income split(halved) for each.

THe non-resident landlords scheme lets you have the tax on income in your account earning you interest

Plus you can claim back any tax you have paid on UK bank interest by the double taxation agreements.

The end result is that each year you stand a good chance of getting a nice cheque from the taxman, plus tax free income from the letting.
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Old 16.12.2009, 21:59
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Re: Ver confused about tax on UK property

This is a really good source of information ! thanks for all the details !
It seems to me that it's best to do declare all in CH and then do a regular tax return in the UK.

Does anyone know how long does it take to register as a non resident landlord with HMRC?

zoro
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Old 16.12.2009, 22:45
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Re: Ver confused about tax on UK property

We got confirmation of non-resident landlord status through in a few weeks (3 or 4? from memory, 2 years ago).

We have been doing as you summarise - we did UK tax returns on our income there, and declared everything here - and seemed to be treated fairly be each system. I don't know if there is a "better" way to do it, but I was relaxed as I got > £1,000 rebate from HMRC for the return for our first year here - fingers crossed that it doesn't go the other way for the 2nd!

One big watch out - which this has just reminded me of - is that I had been completing on-line UK tax returns by 31st Jan each year for years prior to coming here, and then discovered last year that non-residents (of any label - not just Non-Resident Landlords) are not eligible/able to use the on-line tool. It was a big shock to return to doing a paper return!!

Hope this all helps - and may the Force be with us all as we approach those deadlines.....
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Old 16.12.2009, 23:06
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Re: Ver confused about tax on UK property

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We got confirmation of non-resident landlord status through in a few weeks (3 or 4? from memory, 2 years ago).

We have been doing as you summarise - we did UK tax returns on our income there, and declared everything here - and seemed to be treated fairly be each system. I don't know if there is a "better" way to do it, but I was relaxed as I got > £1,000 rebate from HMRC for the return for our first year here - fingers crossed that it doesn't go the other way for the 2nd!

One big watch out - which this has just reminded me of - is that I had been completing on-line UK tax returns by 31st Jan each year for years prior to coming here, and then discovered last year that non-residents (of any label - not just Non-Resident Landlords) are not eligible/able to use the on-line tool. It was a big shock to return to doing a paper return!!

Hope this all helps - and may the Force be with us all as we approach those deadlines.....
Cheers - good point re the Oct deadline! I am just doing my 2008/2009 now so but I am still in the UK.
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Old 16.12.2009, 23:39
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Re: Ver confused about tax on UK property

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One big watch out - which this has just reminded me of - is that I had been completing on-line UK tax returns by 31st Jan each year for years prior to coming here, and then discovered last year that non-residents (of any label - not just Non-Resident Landlords) are not eligible/able to use the on-line tool. It was a big shock to return to doing a paper return!!
I've been submitting online tax returns as a non-resident UK taxpayer for seven years now.
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Old 16.12.2009, 23:42
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Re: Ver confused about tax on UK property

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Technically your tenants in the Uk should be deducting tax on the rent they pay you and paying it to the Uk government.
I don't think this is correct. I've never heard of the onus lying on tenants to declare their landlords' income! That would be akin to a Tesco shopper deducting tax from the supermarket's bill before paying at the checkout.
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Old 16.12.2009, 23:43
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Re: Ver confused about tax on UK property

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I don't think this is correct. I've never heard of the onus lying on tenants to declare their landlords' income! That would be akin to a Tesco shopper deducting tax from the supermarket's bill before paying at the checkout.
it's true.
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Old 21.03.2010, 23:48
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Re: Ver confused about tax on UK property

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THat's not quite right - you need to declare it but it's a series of plusses and minuses on the form. You are not taxed on the actual income twice but the income is entered on the swiss tax form and is used to calculate your total income rate etc. The actual income is taken off again later on in the form (along with capital value overseas) leaving you just with a higher rate.

CH: Tax rate based on (swiss income + uk income) applied to (swiss income)
UK: Tax rate based on (uk income) applied to (uk income)
Sorry to come back to this thread. I also have a property in the UK and my understanding is the same as Glendyn's.

My question is around the allocation of debt. I have a mortgage on my UK property from a UK bank. =>Can I allocate part of my UK mortgage interest to be off-set against my swiss income? (and similarly for wealth?)

As background, I read and heard in a seminar from PWC that you need to allocate debt & interest between Swiss & overseas assets. This rule is intended to stop people who own a house in Switzerland then buy a 2nd home overseas and finance it by re-mortgaging their Swiss house. In this case you cannot "cheat" the Swiss tax system by off-setting 100% of the mortgage interest against your Swiss income. Part of the mortgage needs to be considered as being joined to your 2nd home. You have to "allocate" part of the interest to your overseas income meaning on your Swiss tax return you can only deduct the part remaining against your Swiss income.

So my question is does the opposite apply - can I off-set my UK mortgage against my Swiss income?

Appreciate this is a very technical question...
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Old 22.03.2010, 05:13
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Re: Very confused about tax on UK property

The source, collateral and application of borrowed (mortgage) funds determine how the interest will be deducted. And in which country or both. The 1996 Finance Act changed UK tax law on this regarding deductibility of mortgage interest on non-UK property. Put together, the preceding posts reply to the questions and correct mistakes in the earlier posts. Read them carefully.
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Old 22.03.2010, 07:48
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Re: Ver confused about tax on UK property

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Sorry to come back to this thread. I also have a property in the UK and my understanding is the same as Glendyn's.

My question is around the allocation of debt. I have a mortgage on my UK property from a UK bank. =>Can I allocate part of my UK mortgage interest to be off-set against my swiss income? (and similarly for wealth?)

As background, I read and heard in a seminar from PWC that you need to allocate debt & interest between Swiss & overseas assets. This rule is intended to stop people who own a house in Switzerland then buy a 2nd home overseas and finance it by re-mortgaging their Swiss house. In this case you cannot "cheat" the Swiss tax system by off-setting 100% of the mortgage interest against your Swiss income. Part of the mortgage needs to be considered as being joined to your 2nd home. You have to "allocate" part of the interest to your overseas income meaning on your Swiss tax return you can only deduct the part remaining against your Swiss income.

So my question is does the opposite apply - can I off-set my UK mortgage against my Swiss income?

Appreciate this is a very technical question...
It depends on what purpose your mortgage was used for and whether there is any income to offset against it.

As Andy02 states, the application of the funds determines in part whether or not the interest is deductible to start with. Were the funds applied for the purpose of generating taxable income? You cannot claim the interest deduction if, for instance, you increased a mortgage to purchase a private car or a holiday.

If the funds were used to purchase a house, but that house is being used privately with no rental income or any income generated is exempt from income tax (e.g. charitable purposes) then again the answer is no.

If the income is below market rates (e.g rented to a family member) then there may be a deduction but you will need to declare as income the market rate and not actual return of income before any calculation of net profit/loss is made.

As PWC said, the interest needs to be allocated to what it was spent on, and the income status of that spent item needs to be determined before any deduction can be considered.
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