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.

Tax Benefits of Buying Investment Properties

Property investing has proved itself is a wealth creation vehicle for many generations now. Many families have built their wealth on property acquisitions over a long period of time which now places them in an enviable financial position.

As it becomes clear that current superannuation plans may leave many retirees in a less than comfortable position, the property market provides an alluring alternative. But it is not just a simple matter of buying a property and rubbing your hands with glee at the inevitable positive returns. Careful professional advice is required and tailoring an investment strategy to suit your individual circumstances is vital.

Many first-time investors make glib references to the tax advantages that attached to property investment but a few simple points still need to be clarified. In this article will examine the important taxation considerations of property investment including negative gearing, depreciation, capital gains tax, and how tax benefits can make your investment pay.

* Negative gearing. This term simply describes the fact that you are borrowing money to make an investment. When the costs of the investment are higher than the return you achieve, you are said to be negatively geared. For example when an investment property has an annual net rental return which is less than the interest charged on the investment loan, the property is said to be negatively geared. This loss of income from the property is eventually made up over time as the property value increases. In the meantime however a high income earner can benefit from this as the losses can be offset against their taxable income. Although you should never specifically aim for a negative gearing position, you can take advantage of it if it suits your personal circumstances, and if the properties capital growth potential is going to be positive and greater than the cost of funds, otherwise it is a futile endeavour.

* Depreciation. One of the tax advantages in owning an investment property is that you can claim for depreciation of certain items and reduce your taxable income in the process. Things like refrigerators, furniture and cooktops can be written off over the effect of life of the asset. Naturally, you need specialist advice here and an accountant is the obvious choice. The Australian taxation office determines the schedules and allowances but you still need the services of an accountant and a quantity surveyor to make sure you get the greatest depreciation deduction. New properties have greater depreciation. You can claim two components, the building as well as the fixtures & fittings.

* Capital gains tax. This is charged on the capital gains that your investment property enjoys over the period you own it only if you sell it You become liable to pay the capital gains tax where your gains exceed your capital losses in any income year. This is where specialist advice really comes into its own as you can take advantage of capital losses if you sell the property at the right time. This is a very complex area that your specialist property adviser or accountant can assist you with. Otherwise if you are building wealth, you can get your property revalued and lend against its increased value to purchase another property without triggering capital gains tax.

* Making your investment payoff. After you have owned an investment property for a number of years, you are likely to enjoy substantial capital gains. Additionally, your rental income over the same time can greatly assist loan repayments to a point where it there is very little effect on your cash flow, or to the point of being positively geared. Reviewing your position at that time, you may be ready to add another property to your portfolio.

Take advantage of these tips and plan your property investment strategy only after consultation with experts.

Capital Gains and Flipping Properties

Flipping and taxes are a frequent issue for property investors, since for a long while people have been looking at the real estate market in the exact same way they look at the stock market. The instance of flipping in the real estate market became a great way to get quick funds.

But one of the things that people usually don't check on is the way to avoid the high tax bills on their profits. One of the first ways to avoid high taxes on your profit is treating the particular investment as a capital gain. The usual thing that occurs is that the if you sell a certain property in less than one year you will end up paying less tax, as this amount will be the same as the ordinary income tax rates which is in the 35% bracket. If you have owned the property for more than a year then you will have to pay the long term capital gains tax of 15%.

The way that you will get this property treated as a capital gain is if you can show that you had not tried to flip it. But in order to do this you would have to hold the property for a period of time which would go against the whole notion of flipping the property to make a quick earning. And another key fact of the matter is how often you flip, because if you flip properties too often the IRS will check your records and see if you are doing this for a living and then tax you in all the necessary area's.