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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4181
Experience:  FCCA FCMA CGMA ACIS
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If a London freehold property owned by an offshore company

Customer Question

If a London freehold property owned by an offshore company has been 'valued' at 2 million GBP, must the company now pay an annual tax of 15,000 GBP?

Further, must that company now pay a capital gain tax upon selling?

Further, is the property still protected from inheritance tax?

If the company's nonUK domiciled owner is going to become resident in England for a few years for the very first time ever, starting next year, will the company and the individual still be treated separately?

If the owner lives in the company's house, is this a taxable benefit that must be claimed - and if so, what is the rate of tax to be paid, assuming the individual intends to file on a remittance basis.
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

Firstly always remember that the company and the individual are legally separate persons and account for their own activities to the appropriate tax authorities. This continues irrespective of the company's or the individual's location.

At the moment overseas owners of UK property do not pay Capital Gains Tax (CGT) on disposals, but recent changes state that they will from 6 April 2015. Details remain to be published, but informed sources indicate that this will only apply to the increase in value between that date and the date of sale.

The annual tax of 15K you mention is ATED and applies to properties owned by non-natural persons. The rules are as yet indistinct on whether the company you mention will actually come into the category. The HMRC briefing sheet merely refers to 'certain companies.' It would be adviseable to seek professional advice from trusted, local accountant as to whether the company is so categorised.

The property is owned by a company. Companies are not subject to Inheritance Tax. The shareholders are, however, if their estate which includes such share exceeds 325K on demise.

The company owns the house and so cannot live in it! I assume you refer to the owner of the company. This is possible, but HMRC may consider that the company has let the house at a below commercial rent and may reduce the amount of claimable expenses eg running repairs. If the company employs the tenants and is paying a salary that is quite another kettle of fish and may open the door to receipt of benefits in kind and may increase the tenants UK tax liabilities.
Customer: replied 3 years ago.

Hi there, Thank you for this. So, if the (non-dom soon to be UK resident) owner of the offshore company which owns the house lives in the house - the company will have no income and therefore not pay any tax anyway (previously paid 20% under NRL scheme on rental income), so expenses like repairs will not matter, right?. But will the individual have to claim the 'free rent' as a taxable benefit? This is one question I'm not clear on. The company will not be paying the individual.

Expert:  bigduckontax replied 3 years ago.
Well, with respect, bills like repairs will matter; someone will have to pay them! However I see your point!

There is no requirement for the individual to mention their rent free status unless they are employed by the company and drawing emoluments ie a salary which in this case they are not. Emulate Brer Fox 'For he lay low and say nuffin!'
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Expert:  bigduckontax replied 3 years ago.
Thank you for your support.