Relocation of a company

Case of the month

Introduction

Before 2013, it was quite common for an offshore company (Offco) to own residential property in the UK. Even if the rental income were taxable, the company would not be liable for capital gains tax (CGT) and non-domiciled shareholders would not be liable for IHT either.

Even allowing for the high costs of running an Offco, it was a cost-effective way of organizing ownership.

Issue

Following various legislative developments over the years, the company is now also subject to capital gains tax and shares to inheritance tax. There is no benefit to having an Offco and the client wanted advice on how to transfer ownership to a UK company tax efficiently and save significant ongoing administration costs.

How we solved it

We advised the client to set up a new limited company in the UK and for the Offco to become resident in the UK. Complying with current legislation, properties could be transferred to the UK company without CGT or SDLT charges.

The result

Overseas shareholders now own a UK company which owns the properties at their original cost base and shareholders have significantly reduced annual administration costs.

Note however that the value of the shares is potentially liable to UK IHT, regardless of the shareholders’ domicile status.

Next steps

If you have a similar case to the one above or would like more information about business re-domiciliation, please contact us.