Buying and owning a home

Individuals planning to buy a home in the UK should consider how to fund the purchase and make sure they own the property in the right way.

In all cases, it is critical to fund the purchase tax efficiently and non-domiciled individuals (“non-doms”) should normally avoid the use of offshore income or gains in the UK, for example.

HMRC have issued guidance that has re-opened the door for planning in this area and we can provide appropriate advice to take advantage of this.

Where appropriate, our advice will seek to ensure the funding and ownership structure is right, we will consider:

• The impact of the remittance basis for non-doms;
• Offshore mortgage arrangements;
• Personal ownership and other ownership structures appropriate for non-doms, potentially including offshore trusts and offshore companies;
• Capital gains tax implications, in particular “principal private residence relief”;
• Inheritance Tax (IHT) implications;
• The impact of Stamp Duty Land Tax (SDLT). From 6 April 2011, the charge is 5% on properties purchased for more than £1m, an increase on the previous 4%;
• Planning opportunities to mitigate exposure to SDLT.

These areas can be complex and detailed tax advice should be taken to avoid any “pitfalls”. We advise any non-doms living in a house owned by such a structure to review their position, if they have not done so recently, as the law changed significantly from 5 April 2008.

Property businesses

When seeking to establish or expand a property business, the tax treatment should be a prime consideration.

In particular, it is important to consider whether it is appropriate to set up a specific vehicle for such a venture.

Our advice will seek to ensure you are aware of all the options available and we will consider:

• The various alternatives (company, partnership, LLP etc.) which may be desirable depending on the turnover, funding requirements etc. of the business.
• The commercial considerations, e.g. limitation of liability, should be borne in mind alongside the tax considerations but, as an example, a simple partnership may allow for tax efficient allocation of profits to its various parties.
• Exposure to income tax (up to 50% at present rates) and capital gains tax (currently up to 28%);
• Particular issues with regards capital transactions being subject to income tax – where there is an intention to develop land interests with a view to a profit.

Our team is experienced in the tax implications of owning property interests and can help in mitigating the UK tax exposure as appropriate. Please contact us to speak to one of our advisers.