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Offset of overseas building costs

Offset of overseas building costs against UK income

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I have a client with a UK rental business who is now remitting funds to Turkey to build on a plot of land he owns with the objective of then renting out this new property.  He is UK resident.

As far as I am aware, UK rentals and overseas rentals are kept completely separate for tax purposes and the costs of building in Turkey are capital costs to be recorded and offset against sale proceeds if/when the property is sold for CGT purposes and have no bearing on any existing income or any future Turkish rental income, with only revenue expenditure being offset and DTR available if tax is paid in Turkey as well as the UK. 

My client however has heard from someone else, who he tells me is an accountant, that these costs can be offset against UK income since they are being incurred to create future income which will be remitted to the UK and tax paid.  I have never heard of such a relief and don't believe this is true but does anyone know of a special relief available which I am unaware of?  I can't find any evidence of it myself but you find yourself doubting your own knowledge!

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By AliceBrent
25th Feb 2021 11:28

To be honest, I do not know of any such law or by-law. My parents are investing in Eastern Europe. They work closely with this service - https://dgyinvestments.com/invest/en/real-estate-investing-in-ukraine/ Usually a personal manager advises on all matters related to real estate, but they did not mention such an opportunity. Maybe it depends on the legal registration of such a business? At least I can say that an ordinary self-employed person does not have such benefits under UK law. If you find something in this regard, then I'll be glad to know.

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By AustinA
25th Feb 2021 13:18

Thanks for responding, Alice. I'm of the same opinion but if I find anything to contradict this, I'll keep you posted!

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