Offshore ownership of UK property

Property in the UK, especially in London, has always been very popular with overseas investors. We are pleased to be able to assist with Mortgages for non-UK-resident borrowers. UK nationals resident overseas may also wish to invest in property in the UK. We also include a few guidelines about planning with regard to tax implications of offshore ownership of UK properties.

We can assist non-residents of the UK, British Expats as well as Foreign Nationals, to obtain a mortgage for the purchase of UK property.

UK Mortgages for non-domiciled UK residents - please visit our Mortgages page

UK Residency

Rough guidelines

You would be considered to be Resident in the UK if

you are in the UK for more than 183 days in a tax year
you come to the UK to work for more than 2 years
you come to the UK with the intention of remaining at least 3 years
you stay in the UK regularly for average stays of 91 days or more in a tax year and have a history of successive visits over four years, in which case you will be treated as resident from the start of the 5th year.

Simply stated, Residency is where you live and Domicile is where you consider to be your permanent home. However a long term residency may be considered to have become a domicile for tax purposes. For instance, if you are resident in the UK for, say, 17 of the past 20 years, then for Inheritance Tax purposes your domicile may also be considered to be the UK. New legislation regarding domicile status is expected in the March 2008 Budget, effective April 2008.

A person who is resident and domiciled in the UK is liable for income tax and capital gains tax upon their worldwide income and capital gains, including all that has been earned or gained from outside the UK. Their estate will be subject to UK Inheritance Tax on ALL assets worldwide, including shares in an offshore company owning land in the UK. (The exception to this would be where assets pass to a spouse.)

A person who is resident in the UK but domiciled in another country, has a liability to income tax and capital gains tax on income and capital gains which arise in, or are remitted to, the UK. There will be liability for Inheritance Tax on assets in the UK, this includes property held in the person's name or a Trust in which the person has an interest for life. If the ownership of the property is vested in an Offshore Company of which the person is a director or deemed director, and the property is the residence of that person, then there may be Income Tax liability on "benefits in kind" of that residency.

For a person who is non resident in the UK, although protected from Income Tax and UK Capital Gains Tax, the main problem could be UK Inheritance Tax (IHT). Even though the owner has an overseas domicile, as the property is physically situated in the UK, it would be subject to UK Inheritance Tax. The simplest way to overcome this problem is to vest the ownership of the property in an offshore company, the shares of which are wholly owned by the overseas national. Insofar as UK Inheritance Tax is concerned, the shares become the relevant asset and as they are not situated in the UK, they are excluded from assessment for UK Inheritance Tax.

Non resident Landlords may receive gross rental payments. If the property is to be rented out, and is to be bought with a loan, or a loan will be required for improvement of the property. The interest on the loans should be wholly deductible against UK income tax on rental income. One possible structure could be for the UK resident source of funds to loan funds to another offshore company, which in turn lends funds to the offshore company that will purchase the property, so that the loan agreement for the purchase of the property is between two offshore entities. However, this is something upon which the purchaser should take professional advice.

Ownership of property by an offshore company may also offer much reduced "costs" when a property is sold, as the sale of the property may be effected by the simple transfer of shares (the ownership) of the company itself, and would not normally be subject to UK Capital Gains Tax.

The owner of the company may further protect their assets by settling the company shares into a trust (see the Offshore Trust page "Trusts") thereby ensuring that in the event of their demise, the benefits of the assets devolve seamlessly to the beneficiaries of the trust.

Ownership of property and the tax consequences will be different with every individual. We recommend that a client considering the purchase of property in the UK for their own residency or for letting, should take appropriate legal and tax advice on the matter.

If possible we urge you to take tax advice before you set up any structure. Even if you already have done so Jayga Ltd works closely with UK tax consultants who are experienced in these matters and we will be happy to introduce you to them. We also have a relationship with a firm of London solicitors who are experienced in handling the legal side of UK property purchase by offshore companies or non-resident owners. Please contact us for more information.

Disclaimer: No reliance should be placed on the information posted on this website. The information is provided only as a guide and nothing contained herein should be construed as specific advice. Jayga Ltd makes no warranties or representations regarding the fitness for purpose of the content provided. We recommend that all clients seek the best local advice on legal, financial or tax issues. If you do not have your own professional advisers we will assist you in finding one.