Background

Traditionally, the advice for UK resident but non-domiciled individuals wishing to invest in UK

property in a manner which is effective for Capital Gains Tax purposes was to arrange for the ownership of the property by an offshore trust and company.

A correctly established structure would result in the complete avoidance of Capital Gains Tax, however it could also result in a 40% tax charge on net rental income under s720 ITA 2007 due to attribution of the net rental income to the transferor.

Additionally to avoid the tenants being required to withhold tax payable to a non-resident landlord the offshore company would be required to comply with the Non-resident landlord scheme, which attracts additional professional charges.

 

The Mechanism

The proposed solution uses a specially structured UK Limited Liability Partnership as the owner and landlord of the property.

The Benefits

 

• Risk of attribution of rental income to the UK resident transferor / Settlor under s720 ITA is avoided.

• No UK taxation will be due on any capital gains that arise from the sale of the properties.

• In many cases, the net rental income resulting from the property portfolio will be taxable at a rate of just 19%.

• As a UK corporate entity is used to own the property, matters such as raising finance, are simplified as compared with a more traditional offshore company structure.

• The structure has a low tax risk

The costs of implementing this structure are comparable with those for the establishment of a traditional offshore trust/company structure.

 

Summary

Non-domiciled individuals can establish a low tax risk structure using a UK corporate entity and have all the advantages of simplicity of operation that arise with a UK company but receive the benefits that would only otherwise be possible using an offshore structure.

Contact me for more information.