When considering selling UK property which is in the name of an offshore company, it is recommended that you take legal advice prior to marketing on the advantages and disadvantages of selling the company against selling the property and the likely cost of both.
It is also helpful if the correct structure for the ownership of the property is set up when the property is first bought as this can make the sale of the company easier. One potential issue for ownership of a property in the name of an offshore company, particularly where it is an investment property to be rented to tenants, is the risk of fraud. Unfortunately a few years ago the Land Registry 'dematerialised' the proof of title system so that there is no longer a physical document proving title.
Ownership is recorded purely electronically. This has provided an opportunity for fraudsters to sell property by pretending to be the owner.
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This fraud is more difficult if the property is in the name of a company but it is by no means impossible. The risk is increased if the fraudster operates in conjunction with a solicitor who is less than scrupulous or does not carry out proper checks. There are ways in which the risk of this type of fraud can be minimised and we are able to advise in this respect.
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Please note that tax and property law are complex subjects and you should not rely on this article without professional advice on the facts of your case The London residential property market and in particular that of Central London, has bucked the trend of the difficult conditions faced by other parts of the country in the last few years following the credit crunch. From April , gains on any UK property, including commercial property and residential property owned by diversely held companies, will be chargeable to UK tax.
Properties not already chargeable to tax will be rebased to market value in April for this purpose. ATED-related capital gains tax, which has applied to some residential properties owned by companies since , will be abolished from April Some exemptions are expected to be available to widely held entities which would not be chargeable to corporation tax if they were UK resident, for example pension funds. The mechanism for this is subject to further consultation but one of the proposed ways that this can be achieved is for offshore funds to be able to elect for tax-advantaged status in exchange for complying with reporting obligations to HMRC.
Elected status would give the fund exemption from tax on its own gains in proportion to the equity stake in the fund held by exempt investors.
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Investors would instead be taxable on gains they realise on a disposal of their interest in the fund. Exempt investors could then claim exemption from tax on such gains. Disposals of UK investment properties often involve a sale of the company owning the property rather than a sale of the property itself. In most cases, gains on such disposals are not currently taxable for non-UK resident investors.
Under the draft legislation, gains arising from April to non-UK residents on the disposal of shares which derive their value from UK property will be charged to UK tax where certain conditions are met.
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Meet the Property Team. Gemma Wright Director, Solicitor Tel: Laurie Davison Licensed Conveyancer Tel: These counteract arrangements undertaken prior to April in order to circumvent the charge, in particular non-residents seeking protection under beneficial double tax treaties.
Under the draft legislation, gains arising to individuals will be chargeable to capital gains tax and gains arising to companies will be chargeable to corporation tax. Disposals will need to be reported to HMRC within 30 days of completion with a payment on account of the tax also being due on that date in most cases. However, rental profits would be calculated using corporation tax principles rather than income tax principles.
However, there may be cases where a larger shareholding has been fragmented to which this would be applicable. This will result in the distribution of such gains to shareholders by the REIT being treated as a property income dividend potentially subject to withholding tax rather than as a normal dividend. The position regarding a disposal of shares in a non-UK resident company within a REIT structure is likely to be complex.
In particular, gains on the disposal of interests in Jersey Property Unit Trusts held via a non-UK resident holding company within a REIT structure may become taxable as residual income. Introduction of UK tax on gains arising on residential properties held by non-residents where not widely held augmenting ATED gains rules introduced April Introduction of UK tax on gains arising on residential and non-residential property held by non-residents, unless held by a pension fund.
Paradise Papers reveal schemes used to avoid tax on UK property deals | News | The Guardian
Taxation of rental income from UK properties held in non-resident companies to be taxed under corporation tax rather than income tax rules. Non-UK resident investors — gains on direct property disposals Following consultation, draft legislation has now been published to implement an extension to the charge to tax on gains. Non-UK resident investors — gains on indirect disposals of properties Disposals of UK investment properties often involve a sale of the company owning the property rather than a sale of the property itself. This will normally apply where both the following conditions are met: Even if you ignore other potential tax issues, the ATED charge with no possible inheritance tax protection assuming the shareholder is non-UK domiciled and the company is offshore makes it hard to see why this would be attractive.
Paradise Papers reveal schemes used to avoid tax on UK property deals
The position is slightly different for UK residential properties owned purely for investment buy-to-let. Email Clare View full profile. Email Michael View full profile. Email Laura View full profile. Email James View full profile. Email Lucy View full profile. Email Liz View full profile. Email Henrietta View full profile. Meet the team. OTS inheritance tax review - simplification or a significant overhaul? Lasting powers of attorney: protecting overseas assets.
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