All About Business / Finance

Offshore Companies: Planning for the Annual CGT charge

Offshore Companies: Planning for the Annual CGT charge

Planning opportunities for offshore  structures in light of the proposed Annual Charge
New legislation: am I affected?

The 2012 Budget announced some somewhat  ambitious plans for offshore entities ownership  of Residential Property. Consultation papers  published by HMRC on 31st May 2012 target  residential properties valued in excess of £2m
owned or held by offshore companies.

Summary of charges

  • CGT charge of 28% upon sale or gift of  residential property held or owned by an  offshore company. The rates are assumed to be the current CGT rates.
  • Annual Charge. The following charges are  proposed to apply for each property (see  below)

Value of property Annual Charge 2012-2013
£2m—£5m £15,000
£5m—£10m £35,000
£10m—£20m £70,000
£20m + £140,000

  • 15% SDLT rate for purchase of UK Property over £2m in value by a “non natural person” or using of a “corporate envelope” (i.e., Offshore companies) 

Exemptions:Professional Trustees will not be subject to  the Annual Charge but they will generally be  subject to a ten yearly charge which could be as much as 6% of the capital value of the property  If the trustees therefore take out loans to purchase, the equity is reduced by the loan amount.

Solutions:There are several known solutions to “de-enveloping” however without proper tax advice, these solutions are likely to trigger an SDLT  charge of 7%. Using our advice and our affiliate  provider, we are able to assist you to “de-envelope” with the following benefits:

  • Rebase your CGT charge on disposal to current market value.
  • Eliminate the Annual Charge.
  • Mitigate the 7% SDLT that is triggered by most other “de-enveloping” solutions.

When do I need to act?

NOW. The de-enveloping process must take  place before 1st April 2013 in order to avoid the Annual CGT charge.
All clients facing such issues are invited to contact us with urgency.0870 754 0729 fwallace@ctatax.uk.com

@Cornerstone_Tax
Group: Cornerstone
Tax Advisors www.ctatax.uk.com

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