Like many fiduciary professionals in Gibraltar managing UK real estate assets, we have seen a steady erosion of a lot of the benefits afforded to holding UK real estate offshore, both in taxation and disclosure requirements leading to new investments utilising UK-incorporated SPV’s more often, and more client enquiries about the benefits of on-shoring property-holding companies. There already exists a clear process for doing so with HMRC in respect of tax residency, however to date an overseas company has been unable to establish a new domicile in the UK as there is no mechanism under UK legislation. To assign these UK real estate assets to a UK company currently requires careful planning and will be a taxable event, which is likely to hinder greater uptake of on-shoring. 

In a reversal of fortunes to some extent, there are now some benefits to holding property on-shore compared to off-shore, such as the availability of the small profits rate of 19% Corporation Tax that applies to companies with profits below £50,000 which cannot be claimed by an overseas company, as well as the difference in reporting requirements under the Persons of Significant Control register applicable for UK registered companies, and the Register of Overseas Entities that applies to overseas companies having arguably greater disclosure requirements, with a multitude of changes applying to information relating to trusts in recent years. UK registered companies could also benefit from greater access to financing and capital as more lenders omit offshore lending from their risk appetite.

The publication of a report on Corporate Redomiciliation by the UK Independent Expert Panel therefore makes for some interesting reading. This would allow more effective on-shoring of companies holding UK real estate or assets. Although the Report is yet to be considered by Parliament, the recommendations point towards the establishment of domicile not being seen as a taxable event (see 6.14 – although as per 6.48-49 the opposite, i.e. moving domicile outside of the UK, would be) but that it should act as a rebasing event for asset values in relation to inheritance tax (and presumably capital gains tax) – see 6.54; with careful planning we could see interesting opportunities arise for our clients here.

It is worth noting on a related note that Companies House UK is implementing processes allowing corporate directors for UK registered companies, but the strong indication from recent publications is that these will only be permitted where the corporate director is a UK registered company with an all-natural-persons board who are themselves UK resident. As the use of regulated corporate directors is common in jurisdictions with strong fiduciary industries like ours, this will need some consideration if and when the redomicilation process is introduced.

At Line Group and Hassans we will be keeping a keen eye on these developments together with our trusted network of advisors in the UK.

Sources: Report of the UK independent expert panel (publishing.service.gov.uk) ; Economic Crime and Corporate Transparency Act: outline transition plan for Companies House - GOV.UK (www.gov.uk)