Stamp Duty - Transfer of UK Property to Offshore Companies

Prior to the Finance Act 2000, it was common for non-UK domiciled persons resident in the UK to transfer UK land and buildings to offshore companies for IHT benefits, with no stamp duty payable on gifts of land. Since the UK Finance Act 2000, such gifts between connected persons are deemed to take place at market value, with a sliding scale of duty payable, which rises to 4% for properties exceeding £500,000.

One of the benefits of not providing tax advice is our ability to work closely with a number of leading tax law firms to investigate possible solutions for our clients. One law firm has developed a way of enabling individuals or trustees to transfer UK property to offshore companies without incurring the charge to Stamp Duty which would otherwise be payable under Section 119 Finance Act 2000.

They have suggested a method of routing the gift through an offshore trust structure to enable a mitigation of the charge. An additional benefit of this offshore structure is that there may be further wealth planning opportunities, depending on the individual circumstances for each client. There will obviously be costs involved for both the structure and the legal advice from the lawyers, but when compared to the potential stamp duty charge, this is still a very attractive proposal.

It is understood that the law firm has obtained an opinion from Counsel who confirms the use of points of law for this idea. This structure can therefore be considered by clients who are anticipating transferring UK property into an offshore company, for the income tax and IHT benefits that the arrangement confers. Furthermore, where the shares in the offshore company are held by non-resident trustees then this may also avoid CGT, even if the settlor/transferor is UK resident at the time the property is sold.