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UK tax: a guide for foreign investors

With Britain’s exit from the EU putting pressure on the value of the pound and promising a significant decrease in regulation, now is a good time for foreign investors to start looking at assets in the UK. Many have already made significant investments in sectors such as property, watching their assets rise in value significantly over the years, but others hesitate because they’re not sure about the tax obligations involved. In fact, the UK is comparatively straightforward on this front. The Department of Trade and Industry can provide support and advice, and tax relief is available in some sectors through schemes designed to assist both the investor and the industry. 

Major considerations

The first thing that you need to determine when investing in the UK is whether or not you will technically be considered to be trading there. If you are headquartered elsewhere and do not directly employ an agent operating on your behalf on a regular basis in the UK or run a representative office, you will not be considered to have a taxable presence, but your subsidiary assets could still be taxable and you will normally be liable for tax on UK properties. If you have a UK branch, you will be liable for corporation tax, with returns to be filed annually and any tax payments due within nine months of the date of filing. Companies with annual profits over £1,500,000 are normally expected to pay in advance instalments based on anticipated liability. 


One of the most attractive things about the UK for foreign investors is its continually escalating property values. Although these took a hit in the immediate aftermath of the Brexit vote, they are already starting to climb again in most localities, and it is generally anticipated that they will return to a steady pattern of growth within ten years. The temporary slowdown means that now is a great time to buy. The tax status of property investments depends on whether they are made individually, through a holding company, or through a trust. Stamp duty land tax is paid upon purchase of any property valued at more than £125,000, and capital gains tax applies at the point of sale (or inheritance tax applies on properties valued at over £325,000 upon the death of the holder), but in between there are only two issues to worry about: income tax on rental income and annual tax on properties valued at over £1 million. 


Many foreign investors have taken an interest in football clubs in the UK, and the good news is that these are relatively straightforward when it comes to tax. Greek shipping magnate Evangelos Marinakis purchased Nottingham Forest Football Club in 2017, following his purchase of Olympiacos in his home country in 2010, and found it a lucrative investment as well as one that satisfied his personal enthusiasm for the sport. Football clubs are, of course, liable for corporation tax, and the only place where some owners stumble is in regard to the elements of this tax that pertains to transfer fees, which must be taxed appropriately even if they are not publicly declared. 

Green business

Green investments, especially in Scotland, are increasingly attracting foreign investment as eco-friendly investing becomes ever more popular. Scotland already generates more energy through renewables than its total consumption, and several large-scale projects show a lot of potential if initial cash can be found to develop them. The environmental potential of this is easy to see, and although investments may be slow to ripen, the long-term risk levels are very low. This means that initially, low-value assets attract minimal tax despite good long-term earning potential. 


The several tax breaks introduced by the current government have made the UK’s film industry very attractive to overseas investors. This is another area in which initial tax obligations are low, so the element of risk applies only in relation to the success (or otherwise) of the film itself. Investors with the knowhow to make good choices can expect impressive returns. 

Selective Finance for Investment

The Department of Trade and Industry’s Selective Finance for Investment scheme provides tax breaks to foreign investors engaging with a number of industries where capital is currently low. Although this changes over time, it reduces initial obligations and therefore presents an attractive opportunity for investors who are just starting out and want to get to know the UK markets.

The UK’s economy may be facing some unpredictable hurdles at present, but every smart investor knows that unpredictability can present opportunity. If tax is managed carefully, patient foreign investors who are prepared to wait out difficulty stand to do very well.