www.bahrainthismonth.com February 2013 143 Protect Your Property! From April, individuals who own property in the United Kingdom through offshore companies are liable for new taxes. Here’s how to minimise the burden. SOVEREIGN GROUP “Don’t leave anything to chance or leave your wealth to the tax man,” say the experts at Sovereign Group. “Foreigners who own property through offshore companies must now pay an annual property tax and are liable for capital gains tax (CGT), too.” In December last year, the United Kingdom Government published draft legislation outlining new taxes and charges which will have to be paid by offshore companies which own property in the UK. Property owners should start to plan accordingly before the laws come into force. The main features of the proposed legislation will affect properties which are valued at more than £2 million and which are owned by ‘non-natural persons’ — in effect, foreign companies, partnerships, funds and the like. Previously many foreign buyers of UK property have chosen to register their properties in the name of an offshore company in order to avoid UK inheritance tax, which would otherwise be charged at 40 per cent on the whole value of the property, after allowances, upon the death of the owner. Offshore company ownership have also not had to pay stamp duty, as any subsequent sale of the property could be affected by a transfer of the shares in the company, leaving the title to the property in the UK unaltered. But all that is about to change as offshore companies which own property worth over £2 million will now be faced with an annual charge of a minimum of £15,000 and a maximum of £140,000 depending on value. The new tax is called the ‘Annual Residential Property Tax’. In addition nonUK residents will be charged CGT on a property resale at a rate of 28 per cent. New offshore company purchasers will also pay stamp duty at 15 per cent, whereas natural persons will pay stamp duty at the bargain rate of only seven per cent. What should you do? A transfer of property to an individual or individuals who own the company will avoid these charges but expose those individuals to UK inheritance tax at 40 per cent. This is an option which will appeal only to the very young, with hopefully a long life ahead of them, and the very healthy. For those less certain of their own mortality this will not be a sensible option. It is possible to cover the liability by life insurance but you will pay more than you receive. The good news is that there are exemptions from the above taxes, inclusing the fact that corporate trustees are not subject to them. For most people, transferring property already owned by an offshore company to an offshore trust will be the most cost-effective way forward. For new purchasers, making the purchase via an offshore trust will be best. There is also an exemption for bona fide business assets owned by companies. This would apply where the property is rented out exclusively and entirely to third parties, but not used by those connected to the company. Luckily, there has been one important change to the original proposals. CGT will be based upon the difference between the sale price and the presumed value at April 2013. Between now and April 2013, properties can still be transferred to a new structure without CGT applying. If you want to know more, contact either Wassim El Sayegh or Nabil Khoury. E Call 17 151-572. An attractive investment: the London property market
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