UK properties have always been an attraction for foreign investors, especially the rich-ones. Such investors have long been using an offshore company approach to buy UK properties because it keeps their identity anonymous.
So, many investors opt for buying a UK property while living abroad using an offshore company. But buying UK property is not an easy process, and there are different complications and tax structures that investors need to be well aware of. This article will cover all the details about how to have a UK residential property owned by an offshore company.
The real estate sector is one of the favorite investment options for investors around the globe. The UK is one of the prime attractions for purchasing real estate. The following are all the procedure details you need to know for buying a Uk property through an offshore company.
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To have overseas ownership of UK property via an offshore company, the required documents are not large in number. Based on your case, the documents required can vary, but the following are a few of the documents that are commonly required:
All legal documents of your offshore company, proving the legality of your company.
Multiple taxes might be applicable while buying a Uk property through an offshore company. Following are the taxes that an offshore company must/may have to pay against the UK property:
UK legislation allows the purchasing of UK properties by offshore companies or non-UK residents. There are mainly the tax requirements that companies have to follow so that no legal action can be taken against them.
In the last few years, the government is trying to reduce the number of UK properties purchased by offshore or non-UK residents to increase the property sector's diversity. For this purpose, they have lifted many benefits associated with buying UK property through an offshore company.
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Buying UK property seems to be a hassle considering the number of taxes and legal obligations to meet. Still, it is a great investment. Following are a few general factors that you must consider while buying UK property:
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Offshore or non-resident company owning UK property is one of overseas investors' favorite tactics to buy UK property due to the number of benefits with this approach. Following are some of the key benefits of buying UK property through offshore companies:
If an offshore company is not controlled, managed, or seen trading in the UK, then a property owned by that (non-UK resident) company is exempt from capital gains tax (CGT) while selling its property.
But such a non-UK resident can become liable to CGT if multiple UK properties are associated with him/her because it then gives a gesture of having a trade in the UK. So, some investors usually go for one property against one offshore company.
For overseas companies buying UK property, the property documents contain that concerned company name as the new owner of that UK property. So, the main owner behind the offshore company does not appear in property documents.
As the property information is public, which lets anyone search the information about any property, this gives identity privacy to the offshore company's actual owner.
If an offshore company owns a property, selling the property using selling company shares results in no stamp duty land tax (SDLT). That means the buyer will be buying the company's shares, and the ownership of the property will remain at the offshore company name.
The SDLT for more than £1M is 5%, for more than £2M is 15%, and so on. So, a buyer saves a considerable amount, and buyers often take some profit from these savings.
This also helps to avoid the selling information to go in public, as the buyer is legally buying that company's shares. So, identity privacy is maintained both from the seller and buyer side.
Inheritance tax applies to the property net worth when the owner of that property dies. If a foreign company buying UK property, then it is exempted from inheritance tax regulations.
This tax is only applicable to individuals, so holding a UK property through an offshore company legally exempts the inheritance tax when the concerned company owner dies.
But the latest tax laws reforms have somehow extended the inheritance tax to non-UK residents, so you should expect to get fewer benefits compared to past years.
Any rental income from a UK property, either owned by an individual or a company, is liable to income tax. But the amount of income tax varies in both cases. If an individual owns the property, then the income tax goes up to around 50%.
While if an offshore company owns the property, then the income tax is around 20%. This is a significant difference and one of the key factors that urge international investors to buy property in the UK for investment to go through an offshore company approach.
Note: The UK tax laws are frequently changed, so the information given above is not 100% authentic, and it's better that you get the latest tax information before buying/selling UK property.
The offshore structure has long been used worldwide by investors for purchasing properties or doing business activities. The offshore company holding foreign property gives plenty of benefits to investors on top is identity privacy.
So, having a UK company owned by an offshore company and purchasing a UK property is a beneficial approach for investors. But in the past few years, the UK government policy against offshore structure and UK property has become strict.
They are trying to decrease the purchase of properties this way and introducing different tax systems to achieve their goals. But the tax reforms do not mean that the offshore structure is no longer beneficial. There are still dozens of benefits associated with it, making the offshore approach of buying UK property a beneficial activity.
Q: What is an offshore company?
A: An offshore company is a company that is set up in a different country from the country of residence of the owner. Such a company is not used for doing any business activity in that company.
For example, if you are from the USA and set up an offshore company in Hong Kong, you are doing business from the USA and other countries excluding Hong Kong. You are allowed to have the benefits given by Hong Kong, such as tax exemption for HK outside activities, etc.
Q: Can an offshore company own property in the UK?
A: Yes, UK property can be owned by an offshore company. Many overseas investors are using this approach to own a UK property while also having identity privacy. Besides that, an offshore company owning a UK property provides some tax exemption benefits.
Q: Can a foreign company buy property in the UK?
A: There is no restriction on buying a property in the UK if you are a foreigner or a foreign company. It is even more easy to acquire a UK property if you have cash ready without lending money.
Q: Is it better to own property through a company?
A: Buying a property through a company gives you many benefits, on top is the tax and identity benefits. If an individual purchases a property, he/ she is liable to pay income tax on the profits, which is up to 45%.
If a company purchases a property, then the corporation tax against the profit is around 19%. Similarly, owning a property through a company keeps the identity of the owner anonymous.
Q: Can I sell my UK property?
A: Yes, you can conveniently sell your UK property, and there a straight-forward process to do it. If you are living abroad, you can still sell your property with real estate professionals' help.
Q: How to buy UK property from overseas?
A: Buying a UK property from overseas is simple if you are using a trustworthy real estate firm's services. So, the first step is to find a reliable solicitor.
Afterward, the step by step process includes placing your offer, offer acceptance, finalizing contract, deposit payment, and complete payment and transfer.