US Realtors: Help British Clients Reduce 15% FIRPTA when selling Property

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Are UK accountants and US real estate agents ready to protect British sellers from the FIRPTA 15% withholding trap? Under the Foreign Investment in Real Property Tax Act (IRC §1445, 1980), buyers of US real estate must withhold 15% of the gross sale price from foreign sellers—including UK residents.
This withholding is not the final tax. Instead, it acts as a prepayment against US liabilities, reclaimable by filing a Form 1040NR. But delays are common—refunds can take up to 18 months, especially if sellers need an ITIN (Form W-7). Worse, HMRC may still impose up to 28% UK Capital Gains Tax under the Taxation of Chargeable Gains Act 1992, often leaving clients no better off even after reclaiming US tax.
Exemptions exist. Since 2016, no FIRPTA withholding applies where:
• The buyer uses the property as a residence, and
• The purchase price is ≤ $300,000 (£240,000).
If the property is valued ≤ $1m and the buyer intends to live there, the withholding drops to 10%. 1031 like-kind exchanges (IRC §1031, IRS Pub. 544) also defer US tax, but deadlines are strict (45-day identification, 180-day reinvestment).
Example: A UK investor sells a $635,000 condo in Miami. FIRPTA automatically withholds $95,250 (15%). Without filing Form 8288-B in advance, funds are tied up for months—potentially leaving clients exposed to UK CGT bills on top.
⚖️ Key References
• IRS: IRC §1445, Forms 8288/8288-B, 1040NR, W-7, Pub. 544
• HMRC: TCGA 1992, INTM291020, DT19853, UK-US Tax Treaty (2001)
📊 Statistics
• IRS (2023): Over $7.5bn withheld annually under FIRPTA; 30% goes unclaimed.
• HMRC (2023/24): 40,000+ UK taxpayers declared overseas property disposals; 20% linked to US holdings worth £10bn (ONS).
• GAO (2022): Refund delays average 7–11 weeks for ITINs and up to 12 months for 1040NR refunds.
👥 Celebrity Examples
• David Beckham – Miami real estate subject to FIRPTA, requiring treaty credit claims.
• Richard Branson – US ventures face FIRPTA unless mitigated by 1031 or 8288-B.
• Adele – LA property sales risk 15% withholding and refund delays.
• J.K. Rowling – US property would trigger FIRPTA; advance planning crucial.
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