Tax benefits of buying UK property through an offshore structure

There are many advantages to creating an offshore structure and protecting your property in it. Tax advantages are just one of them; Let’s look at this in a bit more detail:

In offshore jurisdictions such as Guernsey and Jersey, there is no tax on income generated outside of Guernsey and Jersey. There are no capital gains taxes, inheritance taxes, or exchange control regulations that allow easy and free transfers of funds.

Both islands are widely recognized as two of the world’s leading international financial centers. The islands offer a first-class infrastructure, stable economy, a transparent, comprehensive, sophisticated, modern and pragmatic legal system and easy access to the courts, efficient company registries with state-of-the-art technology and established relationships with the UK dating back to a series of years. English is the main language.

Using property as an example, let me illustrate a simple yet dramatic advantage of buying property from an offshore company:

In the UK, Stamp Duty Land Tax (“SDLT”) is payable on contracts for the purchase and sale of UK property. The SDLT is the responsibility of the buyer. Just to highlight one of the most obvious and simplistic taxes to pay.

When a UK property is purchased and transferred to an offshore company, the offshore company as the purchaser of the transaction must pay the UK Stamp Duty SDLT land tax. BUT when the shares of the offshore company, which owns the property, are eventually sold, the SDLT is NOT payable in the UK by the new buyer as there is no physical transfer of ownership but only the transfer of the shares to the new buyer. Shareholders of the offshore company will also not pay capital gains tax on the sale price of the shares, as no capital gains tax is payable in the Channel Islands.

The benefit to the buyer of SDLT savings is that it allows the seller to negotiate a better selling price for the sale of the offshore company’s shares.

Many UK properties are owned by international and listed companies, investment firms and funds through an offshore structure.

Typical offshore structures take the form of a trust with a Guernsey or Jersey company. The Guernsey or Jersey company can conduct business anywhere in the world and this would have tax benefits and provide investment and asset protection.

Costs to set up a trust and company structure in the Channel Islands start from as little as £1,500 and could SAVE you more than that simply on the SDLT!

The “offshore management team” meets all regulatory requirements, giving you the PRESS that everything is in order with the affairs of the structure. Annual management fees for each of a trust and company range from £1,500 to £10,000. But make sure you’re dealing with a trustworthy management company that provides excellent service AND value for money! Also check the HIDDEN COSTS by asking the management company directly!

Offshore company management fees include the provision of company directors, company secretary, company treasurer, custody and preparation of accounts. In addition, fees are charged for the time necessarily spent on the trust or company. Additional charges for time spent would depend on the nature of the structure, the activities of the structure and what needs to be done in addition to the scope of work included in the annual management fees. Some structures only contain assets and would not involve any additional work, so there may be little or no charges for the additional time spent.

Many well known, recognized and reputable international companies are incorporated in the Channel Islands or have an element or presence in the Channel Islands. A number of companies listed on the London Stock Exchange, the Alternative Investment Market or other Recognized Stock Exchanges around the world are incorporated in Guernsey or Jersey.

Everyone’s needs and tax consequences are different and a professional should always be consulted. The information in this article is for informational purposes only and specialist advice should be taken on each and every transaction.