ILN: BUYING AND SELLING REAL ESTATE - AN INTERNATIONAL GUIDE

BUYING AND SELLING REAL ESTATE IN ENGLAND AND WALES 110

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 Limited partnerships are private arrangements whose terms do not appear on any central register. 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. 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. 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. It is proposed that provisions requiring the disclosure of the ultimate beneficial ownership of trusts will be introduced in 2021 in addition to the Trust Registration Service, which currently requires

UK and offshore trusts to register if they have a UK tax liability. The Trust Registration Service is expected to be expanded to cover additional trusts from March 2022, including those with no UK tax liability where the trust directly or indirectly holds UK property. 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 ) at rates that 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, the rates are 0% on the first £125,000 of the purchase price, 2% on the next £125,000, 5% on the next £675,000; 10% on the next £575,000 and 12% on the remaining amount. (For a limited period, from July 2020 to September 2021, the UK government, in response to the Covid-19 pandemic, introduced a concessionary rate of 0% on the first £500,000 of the purchase price from July 2020 to June 2021 and on the first £250,000 of the purchase price from July to September 2021.) The relevant rates for purchasers of additional residential real estate (whether buy- to-let property or second homes) are 3%, 5%, 8%, 13% and 15% respectively. First-time buyers of properties worth up to £500,000 may pay a reduced rate of SDLT. An additional SDLT surcharge of 2% for non-residents buying residential

ILN Real Estate Group – Buying and Selling Real Estate Series

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