Re-domicile of a company 

Case of the month

Introduction

Prior to 2013 it was fairly common for an offshore company (Offco) to hold UK residential property. Whilst rental income was taxable, the company would not be liable to capital gains tax (CGT) nor would the non-domiciled shareholders be liable to IHT.

Even taking into account the high costs of running an Offco, this was a cost effective way of arranging property ownership.

Issue

Following various changes in legislation over the years, the company is now also liable to capital gains tax and the shares subject to Inheritance Tax. There are no advantages to having an Offco and the client wanted advice on transferring ownership to a UK company tax efficiently and to save significant ongoing admin costs.

How we solved it

We advised the client to set up a new UK limited company and for the Offco to become UK resident. By complying with the relevant legislation the properties could be transferred to the UK company with no CGT or SDLT costs.

The outcome

The overseas shareholders now own a UK company owning the properties at their original base cost and the shareholders have considerably less annual admin costs.

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

Next Steps

If you have a case similar to the above or would like more information on re-domicile of a company please get in touch.