BVI Company Property

UK property registered in the BVI.

There is nothing attractive from a UK tax perspective about holding a UK residential property via an offshore company.

It is a tax nightmare for the owners, even trying to extract properties from these structures will be a costly exercise.

There are substantial numbers of properties still held by offshore companies who have not taken the opportunity to de-envelop.

There are 21,000 UK properties owned by 9,400 companies in the BVI.

Holding property via a BVI Company

Holding UK property via a BVI company “used to be sensible planning” for the non-domiciled.

By holding a UK residential property via a BVI company, the non-domiciled individual ensured that the property was not included in his estate for inheritance tax purposes.

A non-UK domiciliary would only pay inheritance tax on UK situs assets.  By holding the UK property via an offshore company, the assets the individual holds, are shares in an offshore company – i.e. not a UK situs asset.

Holding property via non-UK companies was becoming less and less attractive from a strictly tax perspective but unwinding them is expensive.

For UK Inheritance Tax purposes, there is now no practical difference between holding a UK property directly and holding via an offshore company.

Given these numerous changes aimed at holding UK residential properties via offshore companies, it really is no longer an attractive option from a UK tax perspective.

To the extent that the value of shares in such companies is attributable to UK residential property, the shares are not excluded property (i.e. they will form part of the individual’s estate for UK IHT purposes).

UK residential property is held by a non-domiciled individual via an offshore company:

The current position:

• Inheritance Tax – To the extent that the value of the shares in the offshore company derives from UK residential property, the value of the shares is included in the individual’s estate for the UK IHT purposes.
• ATED – If the property is being used by the Ultimate Beneficial Owner, or his family, then the company will be subject to an annual ATED charge if valued at more than £500,000.
• SDLT – If buying via a company there is a punitive SDLT rate of 15%.
• CGT – If subject to ATED, any sale will be the subject to the ATED related gain charge on disposal of the property.  NRCGT will also be applicable.
• Income Tax – If the property is being let the non-resident company is subject to income tax.