Article by Adrian Moll
For many years, an attractive way for overseas investors to hold UK investment property has been through the use of an offshore vehicle. Jersey has seen many such structures which remain attractive today. As a non resident landlord, the net rental income is charged under income tax rules at a rate of 20 per cent with opportunity to shield much of the rental income with appropriate debt arrangements. The added attraction is of course that there will be also no capital gain taxable on the onward sale of the property provided the company can demonstrate that its management and control rest outside of the UK.
There will still be many overseas investors owning UK investment property through a UK resident company. The current market conditions may; however, mean the property is currently valued at or below cost and there is now an opportunity to move the property offshore without crystallising any capital gains tax charge in the UK. All future gains in the offshore company will then be exempt.
If the restructuring is undertaken within the activities of an overseas group of companies, and there is not the intention to sell the property within three years, there also exists the possibility of Stamp Duty Land Tax being avoided through the application of group reliefs that are available.
With a reduced rate of tax on income, no future capital gains tax and no transfer tax payable, the current market value of real estate may throw open an opportunity to restructure a client's UK real estate holding structure.
There exist many other issues that will need consideration, particularly if the property has been provided as security for borrowing, but it must be worth enquiring.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.