Transferring beneficial interest in UK properties to foreign company - USERNAME: Forheavenssake1- 06/10/2021

Tax Question:

I am transferring the beneficial interest in rental properties I own by declaring a bare trust in favour of a foreign company

The mortgages I currently hold will continue in my name. Presumably I will be submitting a return from now on in the name of the foreign company and accounting for the rental income as if received by that company.

If so, what happens re the interest paid on the mortgages. I assume I may still deduct it from income. I have provided on the trust deed that for so long as the mortgages subsist and are paid by me, the beneficiary company will reimburse me . Will this suffice, or do I need anything else to be able to deduct it?

Answer:

If the beneficial interest is transferred to the foreign company, as you state the company would need to account for the rental income as it would be treated as the owner for UK tax purposes.

The interest position isn't straightforward. You wouldn't want the company treated as owing a debt of the funds to to, as the interest would then be taxable on receipt by you (even though deductible for the company). I would expect that the preferred option would be as you suggest and for you to make the interest payments on behalf of the offshore company (ie in name only). As such inserting such a provision in the trust deed should be a good strategy.

=============================================================

Disclaimer

=============================================================

i) Please note that the articles/answers contain general guidance only and do not constitute accountancy, tax, investment or other professional advice.

ii) The contents of this article/answer are for information only and are intended to assist readers in identify any tax planning opportunities that may be available to them. The information contained in this answer is not intended to be a substitute for taking proper taxation advice and should not be relied upon in this way. Always consult a qualified accountant or taxation adviser. Your situation will then be looked at individually and specific advice relevant to your circumstances can be given. The Expert does not accept responsibility for any loss arising as a result of reliance on any information contained in this answer.

These Notes (and Disclaimer) do not affect your statutory rights in the United Kingdom.