The following Tax practice note Produced in partnership with Charles Goddard of Rosetta Tax provides comprehensive and up to date legal information covering:
Although a buyer may have reasons to hold commercial and, sometimes, residential property, via an offshore holding structure, the most common vehicle for investment in UK real estate tends to be the UK limited company.
A key exception to this is in relation to dwellings (held for private purposes), for which a UK company is unlikely to be a tax efficient holding structure. This follows the introduction in April 2013 of the annual tax on enveloped dwellings (ATED) and related provisions, the purpose of which was to discourage 'enveloping' such properties in companies (or other non-natural entities) to avoid stamp duty land tax (SDLT) on subsequent sales. Although the ATED regime initially applied to dwellings worth more than £2m, it now applies to dwellings worth more than £500,000 (from April 2016), in each case subject to various reliefs. For further details, see Practice Note: ATED—the basics.
This Practice Note summarises the direct tax (ie corporation tax) treatment of a UK incorporated and tax-resident company (referred to in this Practice Note as a UK company) investing or dealing in UK land.
The main advantages of a UK company are:
simplicity—well understood, easy to set up and run, and UK-based
no withholding tax on dividends paid to shareholders
no tax for existing shareholders when new shareholders introduced
no SDLT on transfer of shares (only SDLT on acquisition of property
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