Overseas BTL property

[Jezzer]

I understand that all uk buy to let properties are treated for tax purposes as a single business. Therefore a loss for one can be offset against a profit of another.

I realise that overseas property is treated slightly different. A loss from a property abroad can not be offset against any uk property profit.

What I don't know is whether a loss from one overseas property can be offeset against another overseas property profit.
Is each overseas property treated as a seperate business where you can't offset a loss from one against a profit from another.
Or are all overseas properties effectively pooled together.

[Jezzer]

Anybody know about this

[Tax Accountant]

I understand that all uk buy to let properties are treated for tax purposes as a single business. Therefore a loss for one can be offset against a profit of another.

I realise that overseas property is treated slightly different. A loss from a property abroad can not be offset against any uk property profit.

What I don't know is whether a loss from one overseas property can be offeset against another overseas property profit.

Is each overseas property treated as a seperate business where you can't offset a loss from one against a profit from another.

Or are all overseas properties effectively pooled together.

Hi Jezzer,

Apologies that you had to post a reminder. I just wanted to be sure before saying anything which may be incorrect or misleading.

Please refer to HMR&C's Property Income Manual PIM4702 - ''Rent from property outside the UK'' for full details, including an example.

I quote extracts from the manual which may be helpful:

''For 1997-98 and later years the taxpayer computes the profit or loss for the rental business as a whole and not the result for individual properties. But they will need to make separate computations for tax credit relief purposes. This is to ensure that the overseas tax they pay on income from a property in one foreign country is only set against the UK tax on that property; they can’t set that foreign tax against UK tax due on income from a property in another country.''

''For 1998-99 and later years new loss rules apply to Case V rental income. All the overseas properties are treated as a single Case V letting business. Hence excess expenditure on one overseas property is automatically set against surplus receipts from other overseas properties. Any overall overseas rental business loss can be carried forward and set against future Case V rental business profits; but it can’t be set against Schedule A rental business profits or against any other income, (FA95/S41 (8)).''

''Case V tax credit relief
Normally, the tax authorities of the country where the let property is situated will also charge tax on the letting profits. This means that a UK resident landlord will pay tax on the same profits both here and abroad. But the double charge is relieved by deducting the overseas tax paid on the property income from the UK tax due on the same income. This is done either under the terms of a Double Taxation Treaty with the overseas country or, where no treaty exists, under separate UK rules.''

''Foreign tax
If the overseas income has suffered foreign tax and a claim to tax credit relief is made, it will be necessary, for the purposes of the source by source rules (see INTM161210), to identify the amount of UK tax attributable to income from each particular property. Where, therefore, tax credit relief is claimed, separate computations of profits and losses for each property will be required.

For the purposes of calculating tax credit relief, losses should be deducted in the order most favourable to the taxpayer's claim. Normally, this will mean that losses should be allocated first against the source that has suffered the lowest rate of foreign tax''

I hope this helps.

Ramnik