UK REAL ESTATE: TRADING OR INVESTMENT

Policyholders frequently request insurance protection for the risk that their investment and sale of UK real estate is treated as “trading” in nature, rather than as an “investment” for tax purposes.

Broadly speaking, the risk in such situations arises in circumstances where a client has bought a real estate asset with the intention to hold the property as an investment and, usually, for more than three years. In a buoyant UK property market however, such clients often receive unsolicited offers from a third party and decide to sell the asset earlier than originally intended. This can give rise to a risk that the real estate should be treated for tax purposes as an asset which is trading in nature, which would bring the sale proceeds within the UK corporation tax net. We would look at all available information and the facts and circumstances of each transaction and then aim to arrange a policy to cover the tax liability, interest, penalties and defence costs in the event of a challenge.

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