What do international investors need to know about UK property?

Guest blog by Kristan King, KPMG

On 23 October 2018 a delegation from the Isle of Man Wealth and Funds Services Association travelled to Manchester to give a presentation to local professionals in relation to the Isle of Man’s expertise in investment property.

The event was organised in conjunction with pro-manchester and held at the offices of KPMG.

Carolyn Gelling of The International Stock Exchange was the first to present, setting out the key features of the exchange and the nature of the clients that have chosen to list on it. Carolyn specifically highlighted the extent to which the exchange is used by UK Real Estate Investment Trusts in order to raise finance, provide transparency over valuation and demonstrate strong corporate governance.

Anne Couper Woods of IQE Limited then presented a case study of a UK REIT that IQE has worked with over many years. Anne demonstrated the ability of the investment company to develop from being privately held to being a public company and how the Isle of Man professional services and governmental sectors had been able to support the business throughout its development. This highlighted the ways in which UK and Isle of Man companies can work together to facilitate investment in the UK and the depth of property investment and management experience in the Isle of Man.

Rachael Hooper of SMP Partners set out some of the changes that are due to come into force in relation to UK taxation of rental income and capital gains for non-resident landlords, affecting both residential and commercial property. In particular, Rachael discussed the shift, for corporate landlords reporting rental income and gains as non-resident landlords, to the corporation tax regime during 2019 and 2020 that will require corporate property investors to adapt to new tax rates and compliance processes. However, the good news is that with corporation tax scheduled to fall to 17%, it may be beneficial to be taxed under the corporation tax regime.

Finally, Luke Ryan of KPMG Accounting Advisory Services set out the potential implications of the changes to lease accounting under IFRS 16 that are likely to impact the financial reporting for both lessors and lessees of property, with more leases expected to come in balance sheet. The changes will result in all operating leases coming on balance sheet for lessees which will affect key performance measures such as EBITDA due to recognition of interest and depreciation costs instead of straight line operating lease costs, resulting in greater front loading of the expense.

The seminar was opened and closed by Kristan King of KPMG Isle of Man who highlighted the nucleus of property investment expertise in the Isle of Man and the opportunities for Isle of Man and Manchester based companies to work together to help match overseas investors with opportunities in the North West.