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Last year The Telegraph, citing research from Jones Lang La
Salle, confidently predicted that buyers from Indonesia, Thailand,
Taiwan and China would be the latest to target UK commercial and
residential property deals and much of the evidence suggests they
have been right.
The global financial crisis has certainly affected risk
appetite, but safe havens such as London have continued to see an
in-flow in prime property purchases by commercial and residential
buyers from Asia, with a large percentage of buyers in the
residential property market being made up of Asians who are
attracted by the weak pound and rising rent opportunities.
The picture is a complex one and Asian, Chinese and
international buyers may be investing as part of a business or
simply buying apartments for their children to live in while they
study in the UK with the intention of keeping the property as a
long term investment for future purposes. With more and more Far
Eastern and international buyers diversifying into the premium
sector of the London and UK property market, the complexities of
international taxation and ownership options mean this is now a
growing opportunity for specialist offshore fiduciary
companies.
The influx of new investors into the market has meant that many
private and institutional buyers from overseas may often be unaware
of the tax issues that arise when purchasing UK real estate.
Moreover, many will not be familiar with the advantages of using
structuring techniques available through offshore jurisdictions.
The UK taxes residents on all income earned anywhere in the world
and for those who are non-UK resident for tax purposes, tax is
still payable on income earned within the UK. Those classed as UK
resident for tax purposes can be liable for a range of additional
taxes from Inheritance through to Capital Gains on the sale of UK
based assets. Stamp Duty Land Tax of up to 5% may also be payable
on the purchase of a property.
The UK tax position can therefore be very complex, but for
buyers from abroad, there are many solutions on offer which enable
properties to be bought and held in offshore structures which
present an opportunity to plan for taxation more effectively.
The choice of such structures is extensive and ranges from a
holding company held in trust for an individual to a very private
or public fund structure, which can be created for sophisticated
and experienced investors.
The most common method used by non-resident non-UK domiciled
individuals to hold property is via an offshore company, where the
company is the owner of the property. For UK resident non-domiciled
individuals the preferred method of owning property is by a company
that is held in trust by a discretionary trust. The trust holds the
property either directly or indirectly through an underlying
offshore company.
For funds, one of the most popular investment vehicles is the
Jersey property unit trust and the Jersey very private fund, both
of which are only subject to the control of borrowing order (COBO)
regime that applies to all incorporations on the Island. This
scheme will allow up to 15 professional investors, usually with a
minimum of Ł250,000 or currency equivalent.
With careful structuring it is it can be possible to mitigate
capital gains tax and inheritance tax, although if the intention is
to live in the property an individual can still be liable to income
tax, as they may be deemed UK resident. However, if the intention
is to buy a property for letting purposes, putting the asset into
an offshore structure can assist in avoiding paying tax on any
capital gain, if the property is sold on in the future at a
profit.
Whether an investor is purchasing for residential or business
purposes, for Asian and other property investors who are non-UK
resident for tax purposes, great care must be taken in the planning
of any offshore structuring to ensure it is tailored to suit the
longer term need of the purchaser. Jersey with its close proximity
to the UK is an ideal offshore jurisdiction for such activity. The
island is an internationally recognised, highly respected and an
established trust, company and fund-structuring jurisdiction, with
a strong finance industry populated by some of the world's
leading accounting, tax, legal and administration firms.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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A discussion which highlights the main aspects which should be taken into consideration by an organisation or individual who is looking to undertake work in a territory other than in its home.
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