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Capital gains tax on UK property

24

Comments

  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    If you were buying a block of flats (or indeed any property to rent out) you would be renting them out, and holding them in an offshore corporate would be extremely tax inefficient as you would get a 25% withholding tax charge on your rental income and you wouldn't be able to offset most of your business expenses (e.g. Mortgage interest) against the rent.
  • AndyGuil
    AndyGuil Posts: 1,668 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    chewmylegoff wrote: »
    If you were buying a block of flats (or indeed any property to rent out) you would be renting them out, and holding them in an offshore corporate would be extremely tax inefficient as you would get a 25% withholding tax charge on your rental income and you wouldn't be able to offset most of your business expenses (e.g. Mortgage interest) against the rent.

    They only need to be held offshore for the sale. ;)
  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    What about the chargeable gain you would create (calculated on the basis of the market value of the property rather than the consideration received) when you transferred the property to the offshore company.

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  • AndyGuil
    AndyGuil Posts: 1,668 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    edited 3 November 2013 at 9:49PM
    chewmylegoff wrote: »
    What about the chargeable gain you would create (calculated on the basis of the market value of the property rather than the consideration received) when you transferred the property to the offshore company.

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    Transfer of the property? Transfer of the company.

    That is if it is needed. If they are going to rent. Most properties are less than £2m as well so it is going to have no effect.

    The latest I saw on withholding tax was 15%. Often tax is offset against tax paid in other countries. If there is even any profit registered. We often see methods of avoiding profits in certain countries. The costs of acquiring a property or even running a property can be so high... :D
  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    AndyGuil wrote: »
    Transfer of the property? Transfer of the company.

    That is if it is needed. If they are going to rent. Most properties are less than £2m as well so it is going to have no effect.

    Not really sure what you mean? You cannot redomicile a company registered in England and Wales if that is what you mean. You could just sell the shares in the company I suppose but that wouldn't involve the property to an offshore jurisdiction for sale so can't be what you're referring to.

    £2 million threshold only makes a difference to how offshore companies are taxed, not UK companies disposing of assets.
  • antrobus
    antrobus Posts: 17,386 Forumite
    AndyGuil wrote: »
    Transfer of the property? Transfer of the company.

    That is if it is needed. If they are going to rent. Most properties are less than £2m as well so it is going to have no effect.

    No effect on what? I'm getting the distinct impression that you have no idea of what you're on about?:)

    The whole point of the FA 2013 changes were to tackle SDLT avoidance. Faced with buying a house in Knightsbridge for £4m you'd set up a company in some friendly offshore jurisdiction to acquire the property, so that when you wanted to sell this modest home, you'd sell the company in order to avoid the incovenience of coughing up £200k. The FA 2013 changes absolutely makes people think twice about going throught that sort of palaver. And (of course) to the extent that it doesn't, it guarantees a nice wodge of cash arriving in HMT's bank account on a regular basis.

    You do not contemplate going through all that offshore rigmarole for a £150k studio flat in Chertsey, because the £1500 potential SDLT saving would be less than the admin costs.
  • AndyGuil
    AndyGuil Posts: 1,668 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    edited 3 November 2013 at 10:20PM
    If they are going to charge rent. How about a foreign company buying a property then transferring that to a UK company at a higher value and to avoid withholding tax. The foreign company charges the UK company for services etc. This is equal to any profit. When the market value has reached the value paid for the property (I.e. the transfer value) the property is then transferred back to the foreign company and sold.

    If they aren't going to rent they can just hold in the foreign company.

    Another way around the tax. A UK company buys a property the costs of buying the property are X% of the value of the property, paid a foreign company. When the property is worth the price paid plus X then the property is sold. No CGT paid.
  • chewmylegoff
    chewmylegoff Posts: 11,469 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    You appear to have hit upon an excellent way of paying stamp duty three times on the purchase of one property, including two lots of stamp duty on the basis of the property's value at disposal rather than its original cost. I'm sure HMRC would be delighted.
  • AndyGuil
    AndyGuil Posts: 1,668 Forumite
    Part of the Furniture 1,000 Posts Combo Breaker
    edited 3 November 2013 at 11:55PM
    They can get stamp duty relief being part of the same group of companies. There have been and probably still many others ways this is being avoided such as transferring property anonymously.
  • antrobus
    antrobus Posts: 17,386 Forumite
    AndyGuil wrote: »
    They can get stamp duty relief being part of the same group of companies. There have been and probably still many others ways this is being avoided such as transferring property anonymously.

    Well you can transfer the benefical ownership as anonymously as you like (for all that might be worth), but the legal ownership of a property is (mostly) these days a matter of public record - it's down there in black and white on the Land Registry.

    I'd stick to your day job if I were you. :)
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