Transfer UK properties to offshore company to avoid CGT - USERNAME: RobertP

Tax Question:

Hello

I am a non UK resident (resident of Malta) but a UK citizen and domicile. I have a residential property portfolio with substantial capital gains that I wish to sell prior to moving back to either France or the UK or elsewhere. The properties are registered in my own name (127 of them in a singles estate) so there is no transfer tax (value less than 125k each). I am thinking of transferring them to to an offshore company to crystallise a capital gain whilst I am non resident. thereby paying no capital gains tax. The plan would then be to sell the properties later, maybe when I am a UK resident or tax payer, so as to minimise the tax payable. Questions:

Is an offshore company a sensible way of crystallising this gain? One of the reasons for doing this would be to allow me freedoms to live where i want to without tax considerations.

Are there any offshore jurisdictions where it would be better to set up an offshore company for this purpose, bearing in mind I may decide to retain the offshore company and assets after I return to the UK or France?

Is there any other advice you can offer as the CGT would be several £millions, and its therefore critical that `i get the planning/disposal right and bullet proof!

Many thanks, Robert.

Answer:

Yes, using an offshore company would be a good choice. The company would hold the properties at the market value at the date of transfer. This would therefore be likely to substantially reduce the capital gain on a future disposal.

You need to ensure that the gain is crystallised free of UK CGT. I assume that you will meet the 5 year anti avoidance requirement?

You should also ensure that the properties are sold in a complete tax year of non residence -- as opposed to non resident for just part of a tax year (eg where you return to UK residence midway through a tax year). The company should clearly be the legal and beneficial owner of the properties.

Any of the CGT free jurisdictions would be acceptable in terms of reducing UK tax. So you could look at IOM, possibly Malta, the carribean tax free jurisdictions etc. Have a look at our "The Worlds Best Tax Havens" book for a complete list.

About the Author

He worked in Ernst & Youngs Entrepreneurial Services department for a number of years before setting up his own tax planning practice. He is now a full time tax author.

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