BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 107
documentation and the most appropriate Will and a Power of Attorney (most likely in the jurisdiction of the offshore company) may also be required to determine who controls the company in the event of death, divorce or incapacity. Partnerships For UK partnerships, the identity of the partners is not disclosed unless the partnership is a Limited Liability Partnership, in which case the members of the partnership will appear on a publicly searchable register at Companies House. Offshore partnerships must register on the ROE and disclose their beneficial owners. Trusts (UK or offshore) Advantages: Common law jurisdictions often have a significant body of law associated with trusts and their operation, providing certainty as to how they can be used. Trust assets can benefit successive generations. Often beneficiaries do not hold a fixed share of trust assets, so a beneficiary’s death or incapacity does not affect the administration of the trust’s assets. Appropriately structured trusts may also offer protection against claims by third parties, such as creditors or on divorce or relationship breakdown. Trusts do not have to register on the ROE unless the trustee is a corporate. Disadvantages: Annual running costs can be high. The trust model may, in the opinion of some, confer insufficient control on the person contributing the wealth to the trust structure. In certain trust jurisdictions (especially the UK), the law may be perceived as allowing the beneficiaries to have too much influence. The trustees’ fiduciary obligation to act in the best interests of the beneficiaries may prove too constraining. In 2022 The Trust Registration Service was expanded, requiring (broadly speaking) trustees of non-UK trusts who
acquire UK land on or after 6 October 2020 or enter into a business relationship with a ‘UK relevant person’ ( e.g., a UK professional adviser) on or after 6 October 2020 to register. Trusts with a UK tax liability (on or offshore) are required to register in any event. 8. Tax implications of ownership structures A major consideration for investors. The taxes that need to be considered include: • In England, stamp duty land tax ( SDLT ) rates differ significantly depending on whether the real estate is commercial or residential. o For commercial real estate, the rate of tax is 0% on the first £150,000 of the purchase price, 2% on the next £100,000 and 5% on the remaining amount. o For residential real estate, for individuals purchasing residential property in England on or after 22 September 2022, the rates are 0% on the first £250,000 of the purchase price, 5% on the next £675,000, 10% on the next £575,000 and 12% on any remaining amount. The relevant rates for purchasers of additional residential real estate (whether buy-to-let property or second homes) are 3%, 8%, 13% and 15% respectively. First- time buyers of properties worth up to £625,000 may pay a reduced rate of SDLT. An additional SDLT surcharge of 2% if certain other criteria are met for non-residents buying residential property in England was introduced on 1 April 2021. o Various reliefs may apply, such as a reduced rate of tax for purchasers of multiple dwellings. These are complex and outside the scope of this guide.
ILN Real Estate Group – Buying and Selling Real Estate Series
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