Investing in northern ireland property

Report an error, omission or problem: Message:. Northern Ireland is the second best region in the UK for buy-to-let investments, while Belfast is the second best city in which to invest in buy-to-let, according to new research. Corrections Report Content. The findings put together by London estate and letting agent Benham and Reeves showed that Scotland is best buy-to-let location based on the speed at which you can recoup your investment on both property price and stamp duty costs based solely on annual rental return.

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Introduction Northern Ireland falls within the UK taxation regime which offers one of the lowest corporation tax rates on trading income in the European Union The overall tax burden in Northern Ireland is one of the lowest of all the major European economies with low personal tax, low social welfare contributions, generous tax allowances and no local taxes on profits or surpluses. The UK has concluded over tax treaties for the avoidance of double taxation and has the largest network of treaties globally. An important feature of many treaties is a reduced rate for withholding tax on the payment of dividends, interest and royalties. The majority of UK-based companies also benefit from an exemption from corporation tax on any foreign dividends that they receive. The UK Government and Northern Ireland Executive are currently engaged in a review process to determine if and when to pass legislation to allow the Northern Ireland Assembly to take on tax varying powers. If the necessary legislation is passed then the Northern Ireland Assembly will be able to set a corporation tax rate lower than the current UK rate of 24 percent.

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Introduction Northern Ireland falls within the UK taxation regime which offers one of the lowest corporation tax rates on trading income in the European Union The overall tax burden in Northern Ireland is one of the lowest of all the major European economies with low personal tax, low social welfare contributions, generous tax allowances and no local taxes on profits or surpluses. The UK has concluded over tax treaties for the avoidance of double taxation and has the largest network of treaties globally.

An important feature of many treaties is a reduced rate for withholding tax on the payment of dividends, interest and royalties. The majority of UK-based companies also benefit from an exemption from corporation tax on any foreign dividends that they receive. The UK Government and Northern Ireland Executive are currently engaged in a review process to determine if and when to pass legislation to allow the Northern Ireland Assembly to take on tax varying powers. If the necessary legislation is passed then the Northern Ireland Assembly will be able to set a corporation tax rate lower than the current UK rate of 24 percent.

All of the main Northern Ireland political parties have committed to pass legislation to reduce the rate of corporation tax to an amount similar to the The lower rate is likely to only apply to profits generated by companies based in Northern Ireland and it is probable that the lower rate will only apply to trading profits and not to passive income.

A decision from the UK Government on whether to proceed with this policy is expected in the second half of. Corporation tax Northern Ireland, as part of the UK tax regime, offers one of the lowest corporation tax rates on trading income in the European Union.

Broadly speaking, and subject to territorial limitations, the liability arises regardless of the legal form of the company, its place of incorporation or whether it has limited or unlimited liability status. The scope of a company s liability to corporation tax is dependent upon its residence status.

A company registered in NI or another part of the UK is, on first principles, subject to UK corporation tax on its worldwide income and capital gains excluding most distributions received from other companies. A company not registered in Northern Ireland or another part of the UK trading through a Northern Ireland branch is subject to UK corporation tax on the profits connected with that branch and on any capital gains arising on the disposal of assets used for the purposes of the branch.

A company is tax resident in Northern Ireland if it is managed and controlled. This is a question of fact to be determined in each case. A company is centrally managed and controlled where the major policy decisions are.

This will usually be where the directors meetings are held. A Northern Ireland tax resident company should be able to access all benefits available under the UK double taxation treaty network. Determination of taxable profits In calculating taxable profits of a company, the profit in the statutory accounts is adjusted for tax purposes.

Expenses are generally tax-deductible if they are not of a capital nature and are incurred wholly and exclusively for the purposes of the trade.

As a general rule and subject to anti avoidance rules, discussed later, interest on loans used for the purpose of a company s trade is deductible on an accruals basis. Where the functional currency of a company is other than sterling, the computation of taxable trading income may be made in that currency, with the taxable income figure alone being translated into sterling. This avoids the creation of artificial taxable income arising from translation differences. Capital gains Chargeable gains are taxed at the prevailing corporation tax rate of 24 percent.

The chargeable gain is calculated after allowance for inflation. Northern Ireland is part of the UK holding company regime which exempts most disposals by a trading group of 10 percent plus shareholdings in trading companies which are resident anywhere in the world.

It is possible to relieve trading losses against the total profits of the same accounting period including investment and rental income and certain capital gains. In general, any excess losses may be relieved against the total profits of the previous accounting period. Any unutilised trading losses may be carried forward without time limit to offset future income from the same trade. Trading losses may also be used against the profits of any other UK company within the same tax group which arise in the same accounting period as the tax losses.

Groups of companies The UK has a system of group relief which allows the transfer of certain tax losses and other tax attributes, and the tax-free transfer of assets, between group companies. Members of a group must be tax-resident in the UK or be a UK branch of a worldwide company and must be in a greater than 75 percent shareholding relationship with one. Groups defined differently also provide relief from stamp duty, stamp duty land tax and VAT. Tax Reliefs The UK tax system provides in certain circumstances for a number of reliefs from corporation tax.

Some of the key reliefs from corporation tax are as follows: Foreign Branch Exemption UK tax-resident companies can make an election that profits and losses of any foreign branch are exempt from UK taxation. This exemption will usually improve a company s overall tax position in investing in northern ireland property whereby the relevant rate of foreign tax is lower than the 24 percent UK corporation tax rate. For the purposes of this scheme only, an SME is defined as a company employing fewer than people and has either a turnover of less than million per annum or a balance sheet total of less than 86 million.

In general, tax relief at a rate of 8 percent per annum on a reducing balance basis is available in respect of long life assets, cars and certain features which are integral to a building. Tax relief at 18 percent per annum on a reducing balance basis is available in respect of low emission cars and other qualifying plant and machinery.

No tax relief is available under the capital allowances code for expenditure on buildings or land. Tax relief is available on certain intangible assets over the economic life of the asset, as determined in the financial statements of the company, or where the company so elects on a straight line basis over 25 years. Dividends Most dividends and other distributions from companies received by Northern Ireland companies are exempt from UK taxation at the corporate level.

This is an exemption system that should apply to most dividends received in an ordinary commercial context. Also, unless the recipient company is a investing in northern ireland property company as defined under EU rules, there is no requirement for the paying company to be in an EU or tax treaty country.

There are restrictions on the application of this exemption. In particular, it will not apply where certain prescribed tax avoidance schemes are in place. Withholding taxes There is no withholding tax on dividends paid by a Northern Ireland company. Income tax must be deducted at the standard rate currently 20 percent on certain payments.

These payments include: — Annual interest, except where paid to UK banks or other UK companies — Royalties — Rents on UK real estate to non resident landlords Full or partial exemption from UK withholding tax may be available if the payment is to a resident of a double taxation treaty-partner country. There is also an exemption for payments of interest to nonresidents in respect of certain wholesale debt instruments and for payments of interest on quoted Eurobonds.

Withholding tax is deducted at the income tax rate of 20 percent from deposit interest paid by UK banks and building societies. However, a non-resident, or a UK resident company, can avoid this withholding tax by filing the appropriate declaration with the financial institution.

Filing and payment The filing date for corporation tax returns is generally 12 months from the end of the accounting period. For large companies broadly those with taxable profits of more than 1. The 1. A company which is part of a group with a large number of companies, is likely to be viewed as large whatever the level of taxable profits and so payments by instalments will apply. Instalment payments are made on the 14 th day of month seven from the start of the accounting period, and then at three month intervals.

For companies which are not large companies, corporation tax is payable nine months after the end of its accounting period. Shipping income A shipping company carrying on a trade in Northern Ireland can be taxed under the normal rules on its trading profits, after deduction for relevant expenses and capital allowances.

As an alternative a shipping company carrying on strategic and commercial management of its ships in Northern Ireland may elect to be taxed under the EU approved Tonnage Tax regime.

This regime allows shipping companies to calculate their taxable profits by reference to the tonnage and usage of the ships operated by the shipping company. The standard corporation tax rate of 24 percent is then applied to the profits calculated.

A high level analysis of the key anti-avoidance provisions are as follows: Transfer Pricing Transactions carried out between buyers and sellers under common control, and who are defined as large companies, must be conducted on an arm s length basis.

If the company does not account for the transaction on an arm s length basis then a tax adjustment is required. The transfer pricing rules are not limited to transactions involving the sale of goods, but extend to payments for other business facilities, including interest on loans. Corporation tax relief is not available for interest that represents more than a reasonable return on the underlying principal amount, or for interest payments on that portion of a loan that would not be advanced if the lender and borrower were not under common control.

The transfer pricing rules apply whether or not the related party is resident in the UK. To ensure that the application of transfer pricing rules to UK UK transactions will not cause double taxation of the same profits, where an increase is made in the profits of one party a compensating reduction in the profits of the other related party is allowed.

Worldwide Debt Cap The worldwide debt cap rules seek to ensure that interest deducted by the UK members of a multi-national group does not exceed the group s total consolidated external finance costs. The rules operate in addition to other existing provisions which can restrict interest deductibility including the UK s transfer pricing rules.

The rules, therefore, provide an additional hurdle which must be passed for interest to be deductible for tax purposes. A specific exemption has been proposed for the financial services industry and the current rules appear to allow debt from some private equity funds to count as external debt.

The provisions contain wide-ranging anti-avoidance rules. Controlled foreign companies The UK controlled foreign companies regime provides, in certain circumstances, that certain profits of companies located in tax jurisdictions outside the UK will be deemed to be taxable on its UK parent even if the profits are not distributed to the UK parent.

The UK Government has recently embarked on a major programme of reform which is scheduled for completion in Full reform of the rules is intended to deliver a much more territorial system, focussing on profits artificially diverted from the UK and is therefore likely to be much less problematic for overseas headquartered multinationals. A further feature of the rules will be the introduction of an offshore finance company regime. In Northern Ireland, companies are required to operate a payroll withholding tax system PAYE in respect of both cash payments and benefits in kind, e.

This applies irrespective of whether the employment is a Northern Ireland employment or a foreign employment. Share based remuneration is generally inside the scope of the PAYE. To the extent that employees have taxable income including share remuneration which is not accounted for through the PAYE system, it is necessary to file an income tax return under the self assessment.

The tax return filing deadline is 31 January following the end of the tax year. Scope of UK income tax An individual s liability to UK income tax depends on their residence position. The current rules which govern whether an individual is resident in the UK or not are complex. Individuals qualify as UK resident if: — They spend days or more in the UK in any tax year; — They have an intention to stay in the UK for at least three years; or — They make regular visits to the UK, averaging at least 91 days per tax year over a maximum of three years.

However, there is considerable uncertainty as to the tax status in circumstances which are outside of these narrow rules. In order to alleviate the uncertainty surrounding the tax resident status for individuals, the UK government has proposed a simplified. Appendix 1 to this document summarises the proposed system for determining the UK residence status of individuals from April. Where an individual s overseas investment income and gains totals 2, or more the election will need to be made by the taxpayer upon filing their UK tax return.

Non domiciled individuals who have been resident in the UK for at least 7 years of the previous 9 years will be subject to a 30, charge if they elect for the remittance basis of taxation. This charge rises to 50, when years of residence reach 12 out of UK employment A non-uk resident is taxable only on their UK sourced income. In the case of a not resident individual undertaking work duties in the UK, only the earnings received which relate to their UK work duties may be taxable in the UK.

A person who is resident and ordinarily resident in the UK will generally be subject to full UK income tax on their worldwide employment earnings.

An individual who is UK resident but either not ordinarily resident or not domiciled in the UK will also have an initial liability to full UK income tax on their worldwide employment income but may be able to claim the remittance basis in respect of any work performed outside the UK.

Expatriate concession There are a number of other tax relieving provisions available to employees coming to work in Northern Ireland. These include the following: — Relocation expenses of up to 8, such as shipping, storage costs and costs associated with the purchase of a new home e. This exemption can be extended to foreign employer pension schemes in certain circumstances.

Employee contributions to such schemes are deductible for tax purposes.

Learn more and compare subscriptions. But my personal view would be that increases occur incrementally. Put it in a pie Michael Kelly. US Show more US. But, unlike south of the border, house prices have prlperty at a much more sustainable rate since investinng. By Margaret Canning the former boss prolerty a Canadian shipyard has been appointed managing director of Harland and Wolff in Belfast. Users are reminded that they are fully responsible for their own created content and their own posts, comments and submissions and fully and effectively warrant and indemnify Journal Media in relation to such content and their ability to make such content, posts, comments and submissions available. Please log in to comment. Recipient’s Email. Sign investing in northern ireland property. Glasgow topped the list of best cities for buy-to-let, where it takes Marc von Grundherr, director of Benham and Reeves, said: «Buy-to-let investment is a complicated business, even more so given the changes to the sector of late, however, the primary indicator of a good investment is always going to investinh the rental yield available.