Following their earlier consultation exercise, the Government has confirmed the intention to proceed with the world’s first public register which will require overseas companies buying UK property to disclose who the ultimate owners of the companies/properties are.
The intention is that draft legislation will be published this summer and the register will go live in early 2021, which will apply to the acquisition of both UK residential and commercial properties.
The stated intention of the register is to remove the opportunity to utilise offshore companies to launder the proceeds of crime through the acquisition of properties in the UK. The obvious impact is that all investors interested in acquiring UK properties via offshore corporate vehicles will no longer be able to maintain privacy.
It should be noted that the register is intended to be a public register and is aimed specifically at offshore ownership of UK-situs property assets. Overseas purchasers of UK property should be aware that from 2021, such details are likely to be a matter of public record.
We hope that there will be further guidance issued on how the register will work in respect of more complex arrangements such as discretionary trusts and nominees, particularly following recent HMRC confusion surrounding the implementation of their Trust Registration Service.
Those holding UK-situs property indirectly through offshore companies may therefore wish to examine their holding structures now to ensure that their tax and legal advice is up to date and, where necessary, consider whether they should utilise the Worldwide Disclosure Facility to put their affairs in order before the register is established.
The public register follows the introduction of a number of provisions in recent years, targeting offshore structures or persons holding UK “high value” residential property: –
- Annual Tax on Enveloped Dwellings (“ATED”), introduced by Finance Act 2013 for properties worth more than £2m; now applies to qualifying properties worth over £500,000 from 1 April 2016.
- ATED related chargeable gains effective from April 2013 at a rate of 28%; applicable to disposals of enveloped properties worth over £500,000 by offshore holding companies.
- Finance Act 2012 introduced 15% Stamp Duty Land Tax (“SDLT”) on purchases of qualifying residential property worth over £500,000 by companies and other “non-natural persons”.
- Non-Resident Capital Gains Tax from April 2015, at a rate of 28%, has been introduced for gains accruing on a disposal by a non-resident individual owning UK residential property, with values rebased as at April 2015; previously only those individuals tax-resident in the UK were liable to CGT on disposals of their UK-situs assets.
- ATED has been subject to the General Anti-Abuse Rule (“GAAR”) and DOTAS (“Disclosure of Tax Avoidance Schemes” rules) since 2013.
- Inheritance Tax on UK residential property that is held indirectly via offshore holding companies, or on loans to fund the acquisition of UK-situs residential property, from April 2017.
- Current consultation relating to CGT on commercial property and property-holding entities
- Current consultation to bring overseas companies into the scope of UK corporation tax.
These provisions have reduced or have the potential to remove any real tax benefits of indirect ownership and the proposed register will remove the right to privacy.
It is essential that those owning and investing in UK property check that their planning is up to date, tax compliant and still relevant in the light of recent developments. The Government Consultation document can be accessed here.
For further details on the above and how we can assist you with regard to your property ownership and whether an offshore holding structure is still beneficial, please contact:
1st February 2018