Wherever possible, overseas buyers should consider acquiring UK property in the name of an offshore company or other offshore vehicle. This is obviously subject to consideration of the administration and running costs of the company and the tax implications. A small number of specialist bridging companies are prepared to lend to Limited & Offshore Limited companies, SPVs, Trusts and LLPs.
This is rapidly becoming a more viable option for clients wanting to add to their portfolio. It is generally not advisable for an offshore buyer of high value property to purchase in the name of an individual, not least of all because it has become very expensive to transfer a property into the name of a company at a later stage. What exactly are the advantages of Offshore Company loans for properties?
The UK and Central London continue to be viewed by overseas investors as a safe long-term investment and post the Brexit referendum high stamp duty costs have been largely offset by the weakness of Sterling. Indeed, it is still not unusual to see fierce competition between overseas buyers for desirable, high value properties.
The advantages of purchasing properties through an offshore vehicle are summarised below:
• A property can be sold by selling the shares in the company with potentially no UK Capital Gains Tax (CGT) or Stamp Duty Land Tax (SDLT). There is no SDLT payable on shares in an offshore company.
• By using an offshore company Inheritance Tax can be avoided. If the property is in the name of an individual, then on their death IHT is potentially payable on the net value of the property.
• If an investment property is acquired by an offshore company any rental income will remain taxable in the UK. If the property is owned by an offshore company only the basic rate of UK Tax (20%) will apply regardless of the level of income. By contrast personal ownership, under which banded UK income tax rates will apply up to 50%.
• No stamp duty land tax is payable by a buyer of the shares in the company.
It should be noted that the above assumes that the beneficial owners of the company are not UK resident or domiciled for tax purposes. There may be capital or other taxes payable in the jurisdiction of the incorporation of the company concerned and/or in the country in which the beneficial owners are tax resident. The acquisition of a UK property, particularly a high value one, should be considered as part of an overall tax strategy with appropriate advice.
There are also advantages in terms of confidentiality when selling as the transaction does not appear on any public register in the UK. Weighed against this, is the fact that a sale of a company is a much more complex process than selling a property and it can also take longer and be more expensive in terms of legal and possibly accountancy fees. Once again advice should be sought.
When it comes to simply owning a property most wealthy and sophisticated buyers do not want their names as owners publicly available. There are security and general confidentiality reasons for this. By having an offshore company as owner someone searching the Land Registry website can only see the name of the company. A determined enquirer would then have to try to search against the offshore company which is likely to be difficult and indeed, depending upon the jurisdiction of the company and the manner in which it is set up, it should be virtually impossible for someone to find out details of the beneficial ownership.
In summary, whilst there are disadvantages and costs to acquiring UK property through offshore loans these are, on balance, substantially outweighed by the potential advantages.