Offshore companies are popular vehicles to mitigate tax liabilities by holding one’s assets outside the UK jurisdiction.
Many businesses and family offices use a non-UK based company as the holding vehicle for their real estate portfolio in the UK so as to benefit from tax exemptions.
For years, properties in the UK held in an offshore company did not have the usual Capital Gains and Stamp Duty Land Tax regimes apply to them but with Capital Gain Tax now extended to companies holding residential properties in the UK, there are increasingly limited benefits to using offshore companies as a tax evading mechanism, at least if the assets are real estate.
To top of matters, the HMRC has now successfully challenged the residence status of a Jersey based company, Development Securities, which owns properties in the UK. The company was deemed as resident in the UK for tax purposes by the HMRC’s First Tier Tribunal.
All is not lost as where a company is “centrally managed and controlled” outside the UK, its non-UK residential status is unlikely to be challenged in this regard. Board members therefore need to be mindful of how the management of such companies are structured.
By Amaka Jackson –firstname.lastname@example.org