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bigduckontax
bigduckontax, Accountant
Category: Tax
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We are non British citizen or residents we own a property

Customer Question

hi ,
We are non British citizen or residents we own a property in London in the name of off shore company , we use it as a holiday home we go there once or twice a year for less than three month in a year .
What is best for us to avoid taxes , we are thinking of transferring from off shore to individuals names a family of 4 persons .
What would be best for us to do to avoid taxes , the property was bought in 2012 we paid 467000 pounds.
would you please let know what are going to pay stamp duty and all expenses
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Stamp Duty Land Tax (SDLT) is only payable when a property is bought and is paid by the purchaser. The rate of SDLT duty on the property is 5%. On transfer you would be liable to UK Capital Gains Tax (CGT) on any gain made from an April 2015 valuation. The gain would be calculated on the current market value of the property at the date of transfer. The offshore owners would similarly be liable to CGT on ultimate disposal. It would not matter if these fur new owners were offshore or UK located, they would still be liable to CGT on the gain on disposal, but, of course, at a quarter each. CGT is at 28%. I cannot advise you on solicitors' fees to arrange transfer, but for a property of this value it could well run into five figures. My immediate reaction is why bother to go through all this palaver. If one or more of the four persons have a falling out you will be in a real pickle and it does happen human nature being what it is. If you spend more than 183 days in the UK in any one tax year you will be liable to UK taxation on your world wide income, but Double Taxation Treaties may preclude income streams being taxed in more than one country. However, these treaties do not protect you from differences in rates of taxation. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
What would best option for us
Expert:  bigduckontax replied 1 year ago.
In my opinion leave it as it is; if it works don't fix it. A transfer in the manner you suggest is akin to re-arranging the deck chairs on the Titanic!
Customer: replied 1 year ago.
In my case CGT will be from April 2016 because the property is less 1 million
Expert:  bigduckontax replied 1 year ago.
No, because it is held by an overseas organization. These are new CGT rules introduced a year ago for overseas organisations and apply to the gain from April 2015 values.
Customer: replied 1 year ago.
CGT is calculated on the gain i make but my property is three years old and i bought for 467000 it was over paid
If sell for 500000 i would only pay CGT on the profit i make which is not much now
Expert:  bigduckontax replied 1 year ago.
Not quite, you would only pay CGT calculated on the gain made from an April 2015 valuation.
Customer: replied 1 year ago.
I am willing to keep the property for 10 years or more ,instead of paying 28% after 10 years ? It would better to pay now before price go up in years
Expert:  bigduckontax replied 1 year ago.
well yes, but you said you were going to transfer into a four person partnership. They will ultimately be liable for CGT too.
Customer: replied 1 year ago.
i am going to transfer to joint owner ship of 4 individuals
Expert:  bigduckontax replied 1 year ago.
So you said and I told you that it didn't seem quite as simple as that. If the four fall out then you could be in for a spot of bother and it does happen.
Customer: replied 1 year ago.
in this case I would be hit by annual tax
Expert:  bigduckontax replied 1 year ago.
Only for council tax and you can't get out of that.
Customer: replied 1 year ago.
From 1 April 2016 there will be a further band for properties valued between £500,000 and £1 million. This will have an annual charge of £3,500.
Expert:  bigduckontax replied 1 year ago.
To what charge do you refer? Council tax is set by individual councils according to bandings issued by the Valuation Office Agency (VOA).
Customer: replied 1 year ago.
Annual Tax on Enveloped Dwellings
From 1 April 2016 there will be a further band for properties valued between £500,000 and £1 million. This will have an annual charge of £3,500
This what I have to pay plus the council tax , council tax we can't avoid for sure I am talking about ATED which I would be saving every year and it might increase in years
in joint owner ship we don't pay this
Expert:  bigduckontax replied 1 year ago.
You are correct. ATED applies in your case from 6 April 2016 to properties valued between 500K and a million. Lexis advises: 'The annual tax on enveloped dwellings (ATED) was introduced as part of a package of measures aimed at making it less attractive to hold high-value UK residential property indirectly, eg through a company, in order to avoid or minimise taxes such as stamp duty land tax (SDLT) on a subsequent disposal of the property.' By using 4 intermediaries HMRC could well consider that 'holding indirectly.'
Customer: replied 1 year ago.
I copy this from gov.uk
If you pay Annual Tax on Enveloped Dwellings (ATED) when you sell the property you'll need to pay Capital Gains Tax.
OverviewYou’ll need to pay Capital Gains Tax (CGT) called ATED-related Capital Gains Tax if you sell a residential property which is completely or partly owned by a:
•company
•company that is a partner in a partnership
•collective investment vehicle, for example a unit trust or an open-ended investment companyThe ATED-related Capital Gains Tax threshold will reduce from £2 million to £500,000 over the next 2 years. It will reduce from:
•£2 million to £1 million from 6 April 2015
•£1 million to £500,000 from 6 April 2016You don’t pay ATED or ATED-related Capital Gains Tax if you own the property direct, rather than through a company.If you’re a non-resident company find out more about CGT when selling (or disposing) of a UK residential property.
Expert:  bigduckontax replied 1 year ago.
As I warned you HMRC might still hold to an opinion that the 4 people holding the property for you are holding indirectly.
Customer: replied 1 year ago.
I want you to confirm to me , that I still have time for the transfer to Joint owner ship before I am hit with ATED and CGT
Joint owner ship of 4 persons ,
we only pay for stamp duty in our case is 5% ?
Expert:  bigduckontax replied 1 year ago.
You will be hit by ATED from 6 April 2016 if the property is valued at over 500K. If you transfer you will be hit by CGT from the gain made from a 6 April 2015 value, but you do have an Annual Exempt Amount of 11.1K to offset this gain. SDLT is payable by the buyer and at the sort of value you quote will be levied at 5%.
Customer: replied 1 year ago.
I would like to point that the cost of property was 467000 when bought , so if I value the property today it won't be more than five hundred so I only pay 28 % of the gain I make 500000-467000= 33000 pounds x 28 %= 9240 pounds
Am i right ?
Expert:  bigduckontax replied 1 year ago.
Not 33K, you have not deducted the 11.1K AEA so it is 21.9K @ 28% = 6.13K CGT due.
Customer: replied 1 year ago.
So after all this what are you in favor of
As I said before we don't live in The UK this is just a family holiday home
Expert:  bigduckontax replied 1 year ago.
I don't like four people holding, there is too much risk of them falling out. I suspect HMRC will consider it tax avoidance and seek to apply ATED and might well be successful anyway.
Customer: replied 1 year ago.
Its not just 4 its family with two sons
Expert:  bigduckontax replied 1 year ago.
Families do fall out, I have known it happen. I still think HMRC will be able to enforce ATED.
Customer: replied 1 year ago.
if we all fall who needs the property any more
Expert:  bigduckontax replied 1 year ago.
With respect I am not a clairvoyant. If things do not pan out then a dissident family member may refuse to co-operate and frustrate a sale without a court intervention, a costly exercise.
Customer: replied 1 year ago.
I appreciate your advice ,
I have no other alternatives to avoid ATED yearly
I don't mind CGT now while the profit is low
Customer: replied 1 year ago.
but do I still have to pay stamp duty
Expert:  bigduckontax replied 1 year ago.
I concur with your view. No the buyer pays the stamp duty, but as that is your family you are correct! Please be so kind as to rate me before you leave the Just Answer site.
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Customer: replied 1 year ago.
one last question , in this transfer do are paying stamp duty because the seller and the buyer are same names
Customer: replied 1 year ago.
Thank you so much and have a good night
please I don't wish my name to appear in the your website .
Best Regards
Bader
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
The parties involved in the transaction are irrelevant, SDLT is still payable by the purchaser.

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