Tax Benefits of Buying UK Properties Through an Offshore Structure

There are many advantages to creating an offshore structure and protecting your property in it. Tax advantages are only one of these - let's look at this in a little bit more detail:

In offshore jurisdictions like Guernsey and Jersey, no tax is payable on any income generated outside Guernsey and Jersey. There are no capital gains tax, no inheritance taxes and no exchange control regulations which allows for free and easy transfers of funds.

Both islands are widely recognised as two of the worlds premier international finance centres. The islands offer a first class infrastructure, stable economy, a transparent, comprehensive, sophisticated, modern and pragmatic law system, and easy access to courts, efficient company registries with cutting edge technology and established relationships with the United Kingdom which goes back a number of years. English is the main language.

Using property as an example let me illustrate an simple but dramatic advantage of buying property in an offshore company:

In the UK, stamp duty land tax ("SDLT") is payable on contracts for sale and purchase of UK property. The SDLT is payable by the purchaser. Just to highlight one of the most obvious and simplistic taxes payable.

When a UK property is purchased and transferred to an offshore company, the UK stamp duty land tax SDLT is payable by the offshore company as purchaser on the transaction. BUT when the shares of the offshore company, which owns the property, is eventually sold on, then SDLT is NOT payable in the UK by the new purchaser as there is no physical transfer of the property but only the transfer of the shares to the new purchaser. The shareholders of 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 that derives from the saving of SDLT for the purchaser is that it allows the seller to negotiate a better sale price for the sale of the shares of the offshore company.

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 a Jersey company. The Guernsey or Jersey company can conduct business anywhere in the world and this would have tax benefits and provide protection of investments and assets.

The costs for setting up a trust and a company structure in the Channel Islands starts from as little as £1,500 and could SAVE you more than that merely on the SDLT!

All regulatory requirements are met by the "offshore management team"which gives you PIECE OF MIND that all is in order with the structure's affairs. The annual management fees for each of a trust and a company ranges between £1,500 and £10,000. But make sure you deal with a reputable management firm that will deliver excellent service AND value for your money! Also check on HIDDEN COSTS by asking the management firm directly!

Management fees of the offshore company include the provision of company directors, the company secretary, the company treasurer, safe custody and the preparation of the accounts. Fees are charged in addition for time spent necessarily on the trust or company. The additional charges for time spent would depend on the nature of the structure, the activities of the structure and what needs done in addition to the scope of the work included under the annual management fees. Some structures only hold assets and wouldn't involve extra work so there could be no or minimal charges for additional time spent.

Many well known, recognised and reputable international companies are incorporated in the Channel Islands or have a Channel Islands element or presence. A number of companies listed on the London Stock Exchange, the Alternative Investment Market or other Recognised Stock Exchanges over the world have their incorporation in either Guernsey or Jersey.

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