For anyone looking to purchase a property in the UK that has a significant value, there are a number of tax planning opportunities available.
The main options are:
Using an offshore company with or without offshore trust above it
Direct ownership
Direct ownership through a nominee (e.g. bare trust)
Ownership through offshore trust or double trust structure
We look at this in this article:
Tax analysis of the main options to purchase high value UK property tax efficiently
It used to be that using an offshore company was the preferred option - particularly where the purchaser is non UK domiciled.
The problem with this is that if the property is valued at over £2M the rate of SDLT is 15% on the purchase.
This rate of SDLT is usually too high a price for this structure. In addition the "Annual Tax on Enveloped Dwellings" (ATED) would be payable by the company (between £15k-140k per year)
If using an offshore company capital gains tax would apply at 28% but only on the post-5 April gain on sale of property. There is no charge for sale of the shares in the company
UK resident occupiers would also need to take care to avoid benefit in kind charge that could arise under the income tax provisions
The main benefit is for UK inheritance tax purposes. The value of the property is wrapped up in the value of the offshore company and therefore there would be no IHT liability for non-UK domiciled settlors.
