The Limited Liability Companies Act 1996 is now on the statute book and LLC's are beginning to find favour, particularly in international tax planning where characterisation for tax purposes is required.
A potential use in the domestic market of LLC's has arisen for Isle of Man residents who are considering purchasing property in the UK for investment purposes. If the property investment is made in an LLC an inheritance tax exposure in the UK on the property will be removed due to the corporate nature of the ownerships. For income tax purposes the rental income will still be subject to UK tax at the basic rate (23% from April 6, 1997). The company, however, should not have a liability to Manx tax as credit would be given for the UK tax paid. Therefore, a UK inheritance tax exposure is removed at no income tax cost.
Much the same fiscal result can be achieved by using a converted corporate structure but it is considered that an LLC will produce significant saving in compliance and other costs.
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.
Further information is available on the scheme from Bruce Taylor, PO Box 250, Grosvenor House, 66-67 Athol Street, Douglas, Isle of Man IM99 IXJ, Tel: +44 (0) 1624 672332, Fax: +44 (0) 1624 672334. For additional information on taxation in the Isle of Man enter a text search 'Deloitte & Touche' and 'Business Monitor'.