UK resident or ordinarily
resident owners of an off-shore company who are also UK Domiciled, may find
that anti-avoidance legislation can charge them capital gains tax and those
gains will not have the benefit of taper relief for personal gains. Unless
the asset was acquired after you became a non-resident if you sell the
property while non-resident but are not absent for at least five full tax
years you will be taxed in the year you return to the UK,.
Taxes such as capital gains tax, stamp duty and capital taxes on property
transfers may also sometimes be negated or reduced by ownership through an
offshore company, there may also be jurisdictions that do not allow
ownership through an offshore company and require the use of a local
company.
If you wish to live in or return to the UK and keep your home through a
company you may find that you are liable to UK income tax as you could be
seen as a ‘shadow directors’, thereby allowing the UK Inland
Revenue to tax the home as ‘available accommodation’ by virtue
of their ‘employment’ i.e. a taxable benefit in kind similar to
a company car. If the property is let anti-avoidance legislation often
means that the rent will be treated as your personal income. On the more
positive side however all legitimate company expenses and for example
interest on any loan can be set against the income
For those are UK domiciled they will always be liable to UK inheritance
taxes on the value of the shares in any company (which would for example be
based on the assets, such as the property itself, irrespective of where it
is based) even if you are non-resident. Once again however it may be
possible to legitimately shelter the shares in the company through an
offshore bond and trust. You may also find that if you decide to sell the
property by selling the shares you may be surprised to discover that their
price has to be discounted to encourage someone to buy the company instead
of the property directly.
Those non-UK domiciled are only liable to UK inheritance tax on ‘in
situ’ UK assets, so purchasing UK homes through a non-UK company can
avoid UK inheritance tax by exchanging a UK asset (the property) for a
non-UK asset (the shares). However, if you are
UK
resident, the shadow director rules may mean that
alternative inheritance tax planning options should be taken.
Even if an offshore company can save taxes there is little point a company
that is based in a jurisdiction that is highly taxed. This may have put the
country where you are resident or where the property is based on a list of
‘tax havens’. Countries that are averse to ‘tax
havens’ often apply penalties to companies based in them.
Of course using offshore companies to purchase property can expose you to
the tax rules of several countries, the country where the company is based,
the country where you are resident and the country where the property is
located.
Spain
for example, has rules that can effectively treat the
sale of an offshore company as if it was not there if it owns a Spanish
property. Of course if the company sells the property and then passes the
funds to the shareholders, the funds may also give rise to tax bills.
There are many considerations but it is certainly worth investigating
whether owning your property though a company would be of advantage to you.
Ross
Pays is the Chairman of The FAA based in Cyprus. FAA offer advice on wills,
tax registration services, home, health and car insurance, investment
services and tax planning, including Inheritance Tax Planning, together
with full accounting services.
Visit Ross Pays website at www.rosspays.com, Telephone 00 357 25 82 58 76, Fax 00 357 25 33 35 93 or
e-mail ross@rosspays.com
Initial consultations are free and no obligation and
fee quotations will be provided in advance for all services.
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