A further of the five attractive aspects of making an investment in London is related to the property rental regulations in force in England.

– General Provisions:

A first note that, as a substantial difference with Italy, is that rents are expressed in weeks.

For example, a flat rented at 400 GBP per week does not mean that you receive a monthly rent of 1,600 GBP, but rather a rent of 1,733 GBP. This result is derived from the weekly rent multiplied by the number of weeks in a year, i.e. fifty-two.

–Contracts:

The legislation does not place any limit on the maximum duration, but only on the minimum duration.

Thus real estate may be leased for a minimum duration of one year and with certain characteristics. One of these, where the parties agree, is inherent in the break clause.

A break clause means the possibility of both parties to terminate the lease before its natural expiry. The exercise of the break clause is contemplated in the contract itself, where the terms for which either party may exercise it are set out; this clause allows for greater flexibility in the contract signed between the parties.

–Rent payments:

Rents are values derived from the supply/demand relationship of the property rental market, as are rent updates. That is, these rents are not linked to consumer index updates, but remain unchanged throughout the term of the contract.

When the lease expires, the rent will possibly be renegotiated as a result of the market value at that time.

In the lease there are certain obligations and limitations for the parties. The landlord is obliged to carry out all ordinary and extraordinary maintenance, where necessary, to the rented property.

The tenant may not make any changes to the property, such as decorating the walls or affixing furnishings to the walls.

–Features:

It follows from this that the landlord, if he does not live near the property or due to lack of time, will have to mandate the management of the property. The manager will be in charge of rent collection, maintenance and all related activities.

The performance of this mandate shall be governed by special management contracts for an economic consideration. This fee paid by the lessor becomes a 100 % deductible cost for the purposes of determining the taxable income on which the tax due to the Treasury (HMRC) is calculated.

Another feature is that within the rent any condominium charges (service charge) are contemplated, i.e. included. Both the condominium expenses charged to the tenant and those charged to the landlord are deductible elements in their entirety.

–Conclusions:

It should also be noted that in England there are no taxes on the ownership of real estate.

The full legislation governing property leases in England, including all its implementations to date, can be found at: http://www.legislation.gov.uk/

Following the recent global economic freeze, with different repercussions in different countries, the UK is considering an exemption from Stamp Duty Tax.

In fact, many trade associations, such as the National Federation of Builders and the Royal Institution of Charted Surveyors, are expressing to the Boris Johnson-led government the need for a suspension of the tax payment.

Previous articles have explained the same, its applicability and exceptions on a case-by-case basis; the aim of the suspension is to revive the property market after the lockdown.

Events:

Immediately after the UK’s exit from the European Union, the London property market had seen strong increases in terms of transactions and demand; this was due to the fact that the period of uncertainty was finally over.

Unfortunately, with the advent of Covid-19 came a total freeze, one would say on the surface, but in reality this is not the case. In fact, many foreign investors expressed interest in investing in London during this period as well.

Certainly, taking advantage of the uncertainty of the future to be able to extract better prices than a few months ago, the recent acquisition of the Ritz Hotel by a direct family member of the Emir of Qatar made headlines.

The requests from investors are also for the purchase of single property units in exclusive areas of London, such as Mayfair or Knightsbridge. We can say that history teaches and repeats itself.

The government is currently putting in place further measures to address the needs of the country and the Stamp Duty Tax exemption for home buyers will almost certainly be approved. Its subjective applicability and time limit will have to be seen.

Indirect confirmation comes from the fact that, despite the period, the government has let the EU know that it must resume negotiations on the trade agreement and that it has no intention of extending the transition period; this is with the aim of being able to give new and certain rules to all investors from 1 January 2021.

Next we will discuss the strategies and government reform acts, under consideration in Parliament, which aim to make the UK even more attractive from an investment perspective.

Some of these can be found at: http://services.parliament.uk/bills/

The UK economy context:

In the aftermath of the global pandemic better known as Covid-19, all the world’s economies are finding themselves assessing the consequences on the economic system.

In this particular case, the UK economy is contracting in nominal terms and beyond.

The lockdown, or freezing of almost all activity in the country, began on March 23rd but, for a fortnight, there had already been a reduction in the flow of people on public transport and the cancellation of many jobs.

Data:

The UK’s Treasury and Economy Ministry has published data for the first quarter and it shows :

GDP contraction of 2 %, the largest recorded in the last decade;

consumption contraction of 1.7%.

Compared to the rest of the world, these figures place the UK among the countries that have suffered the smallest contraction in GDP so far, especially when compared to the Eurozone, which recorded a 3.8 per cent contraction in GDP.

Added to this is the fact that the Eurozone countries imposed the lockdown, on different dates.

The government’s response to the lockdown of the economy caused by Covid-19 was not slow in coming. Indeed, it has responded with various interventions and above all with an initial economic manoeuvre of GBP 350 billion to support the economy.

These responses were financed by the Bank of England and the placement of government bonds on the market, offering an interest rate of 0.6%, given that demand was three times greater than supply at the time of placement.

Fundamental is the role of the Bank of England, which acts as guarantor for loans granted to medium and large enterprises.

While for small businesses, the banks provide funding that is 80 % guaranteed by the government, with the remaining 20 % prohibited by law from requiring further guarantees.

News :

Specifically, the London property market has suffered a setback, although according to a report in the London Evening Standard, according to data published by the Land Registry, prices in the city of London have recorded an overall increase of 4.7 % compared to the same period last year. Certain areas of the city, on the other hand, experienced much larger increases.

For example, the Borough of Kensington and Chelsea recorded a price increase of 14.6%, the Borough of Westminster recorded an increase of 13.5%.

The consequences of Covid-19 are yet to be fully deciphered and implemented in the real economy. However, to date it can be said that the UK has responded in a timely manner with action to support the economy.

We will see what the impact will be on other countries’ economies and what their recovery rates will be.

A final piece of news worth noting is that the Japanese car manufacturer Nissan has announced plans to shift production from Spain to the UK.

All economic data for the first quarter can be found at: https://www.ons.gov.uk/economy/

In the previous articles we discussed what levies, due to having tax residence in Italy, a person is obliged to pay when making a real estate investment abroad.

First of all, distinctions must be made between the different aspects of residence, which are often the cause of confusion and misinterpretation.

Questions :

Aiding this by answering the following questions can help us to clarify. What is the difference between civil residence and tax residence? Who is considered to be resident for tax purposes in Italy? When someone is no longer considered to be resident for tax purposes in Italy?

Answers:

The definition of civil residence is found in Article 43 paragraph 2 of the Civil Code. In fact, it defines residence as the place where the person has his habitual abode.

In order to give a broader explanation, we must analyse the first paragraph of the same article.

In the first paragraph of Article 43, we find the definition of domicile. Domicile means the place where the person has established the seat of his business and interests. Thus, domicile represents the seat of the person’s economic activities, whereas residence corresponds to the person’s home. Indeed, residence does not always correspond with domicile.

According to the principle of World Wide Taxation, persons registered in the register of resident population must be and are in any case considered to be tax residents in Italy and therefore taxable persons for income produced in Italy and abroad.

To answer the question, when a person no longer has tax residence in Italy, the law provides for a procedure: i.e. registration in the register of Italians resident abroad (A.I.R.E.).

When one moves to a foreign country with one’s residence and domicile attached, in order not to be considered resident in Italy, one must register with the A.I.R.E. using an on-line procedure.

Failure to register, and therefore not being removed from the register of residents, entails the obligation to declare one’s income in Italy. This procedure, however, runs the risk of infringing the principle of contributory capacity laid down in Article 53 of the Italian Constitution, but we will discuss this aspect later.

Annotation:

On this point, however, a clarification is in order; if a person emigrates abroad and registers with the A.I.R.E. in a country or territory with a favourable tax regime, in accordance with the Ministerial Decree of 4 May 1999 and its subsequent amendments and additions, he is ALWAYS considered resident in Italy.

Next we will specifically analyse the convention converted into law n. 329 of 31-12-1990 stipulated between Italy and the United Kingdom to avoid double taxation.

The list of countries considered to have a favourable tax regime can be consulted at: https://www.agenziaentrate.gov.it/.

The AIRE registration procedure can be consulted at : https://www.esteri.it/mae/it/servizi/italiani-all-estero/aire_0.html

Here is Brexit, and there is finally an end to an issue that has been in the news for over four years.

In fact, on 12/24/2020 the agreement was found that regulates trade relations between the two blocs as of 1/1/2021. Over the course of these years, there has been much speculation on the subject, predicting doomsday scenarios that have not come true.

Changes:

The agreement reached between the parties, regulates several aspects in the relations, among the most important points we find :

(a) Free trade between the EU and the UK without any application of duty;

(b) Free movement of capital without some restrictions;

(c) End of free movement of people.

Basically nothing changes for the first two points; while there is a change for point C.

In fact, from January 1, 2021, those who want to travel to the UK to work or study will have to apply for a visa. In the case of a work visa, a point system has been introduced that takes into consideration several factors including : education, work experience, English language skills, job offer, and age.

What are now the prospects for the UK after Brexit? What strategies will be adopted to position itself as an autonomous entity in the international market?

To date, the UK has already concluded trade agreements that will take effect from 1/01 with 90 countries.

Data :

The table below shows, that for the year 2019 (latest available data), the UK exports 57 % to non-EU countries and 47 % to the EU itself, respectively. Opposite numbers for imports, in fact the European Union is the largest exporter to the UK. That is why the agreement between the two blocs was almost a foregone conclusion!

In light of the above data, leaving the European Union represents greater freedom of movement in terms of concluding free trade agreements.

The strategies in place, of the government led by Prime Minister Boris Johnson, are to legislate a series of measures aimed at, the attraction of foreign investor to the UK.

At the end of this whole process, there has been neither the collapse of the pound nor the total relocation to Continental Europe of the major global players present in London, to which cities such as Paris and Frankfurt had hoped to see.

The full text of the agreement with the European Union can be found at : http://www.gov.uk