Isle of Man News - POSTED Wed 27-06-2012

Justine Herridge of KPMG considers the UK Government’s new consultation paper

by Lisa Corkish

Justine Herridge of KPMG considers the UK Government’s new consultation paper

The UK Government has published a consultation paper entitled “Ensuring the fair taxation of residential property transactions” - but it is difficult to see how the new package of measures can be considered “fair”!

 

According to news reports, the Isle of Man is the most popular place to register UK properties for tax avoidance purposes with 23,147 properties being registered here since 1999. These new measures are therefore likely to affect the continued use of Isle of Man companies in this way, in particular how non-UK resident individuals structure future UK property acquisitions and whether the retention of existing property structures is still worth it.

 

It is clear that the UK Government’s main objective is to encourage those who own UK homes in offshore companies to remove these properties from those entities and to discourage future investors from buying homes through offshore structures.  Under the proposed new rules, a non-UK individual acquiring a residence worth £2million through an Isle of Man company will now have to pay 15% stamp duty land tax, ie £300,000 (to be included in Finance Bill 2012), an annual charge of £15,000 and capital gains tax on the total gain accrued (and not only the gain accrued after the implementation of the new charge in April 2013). It is worth noting that it has been proposed that the annual charge will not apply to UK residential properties held within an Isle of Man trust but the capital gains tax charge may do.

 

Individual owners of high value residential property who wish for reasons other than tax-avoidance to continue to hold them within an offshore structure, eg privacy or asset protection, will now have to pay an annual charge for the privilege.

 

Draft legislation will be published in the autumn and introduced in Finance Bill 2013. In the meantime, those with existing structures should start reviewing them to see whether they still achieve their original purpose or whether it would be worthwhile to dismantle them before April 2013.

 

Justine Herridge is a Senior Manager in the Tax Department at KPMG in the Isle of Man and can be reached on 681 062 or by email at jherridge@kpmg.co.im.

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