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bigduckontax
bigduckontax, Accountant
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I'm considering buying some properties in the UK. I

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I'm considering buying some properties in the UK. I currently live here, on my husbands tier 2 visa. I'm unemployed right now. Would it be better for tax purposes to set a company up in the Isle of Man and buy the properties in that company? The alternative is to use a Limited company in the England. The properties I'm looking to purchase is for buy to let purposes, total value will be around £500k with yearly yield of 10%.
Submitted: 11 months ago.
Category: Tax
Expert:  bigduckontax replied 11 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

If you buy through a UK company the income will be subject to Corporation Tax (CT) at 20%. If you use an IOM Company the rate of corporate taxation will be 0%, but you will, of course, have management expenses and the IOM being a tax haven and it big business there, these will not come cheap.

UK tax would be of the order of 10K and quite frankly using an IOM base might cost almost as much as that. As you are not one of the big boys like Amazon or Starbucks the IOM game may simply not be worth the candle. There has been much adverse comment in the media regarding the use of tax havens and in the long term legislation may move against that procedure.

There is a further danger that for an UK company HMRC may say that ir35 applies and the income is really yours, not the company's and you be assessed accordingly. It all depends upon where the 500K from investment is coming. If it is from your personal funds that HMRC will almost certainly try to apply ir35.

I am so sorry to have to rain on your parade.

Customer: replied 11 months ago.
Hi Keith,Thanks for your answer. I'm happy to have rain now before making a decision that costs a lot of money in the future.To respond to some of your comments:
The funds are my funds from South African and the plan is to keep building a property portfolio to benefit us in retirement and also to leave to our kids when we move on.Another consideration is that we may move to another country in the next 4-5 years.Thanks
Niel
Expert:  bigduckontax replied 11 months ago.

To avoid ir35 Niel the IOM route might be safer. At present if you die then any assets over 325K will be taxed at 40% unless you can show you are domiciled elsewhere. South Africa seems a possibility here. Under UK Inheritance Tax (IHT) rules children will, by 2020, be able to inherit a family home up to 1 million in value, but, of course, if you are domiciled elsewhere UK IHT will not apply to you.

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Expert:  bigduckontax replied 11 months ago.

Thank you for your support.

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