WHAT CAN PREVENT SDLT FREE DE-ENVELOPING?
SDLT FREE PROPERTY DE-ENVELOPING IS ONLY POSSIBLE IN CERTAIN CIRCUMSTANCES & EVEN THEN QUITE TECHNICAL
It is unfortunately not easy to avoid a double SDLT tax event when de-enveloping a property in favour of its original ultimate beneficial owner. The reasons why this is the case can often seem semantic and/or technical but they nonetheless are real and hence must be strictly adhered with and often in a particular chronological order. In fact, because of the combined need to have detailed UK and international company law knowledge very few conveyancing firms are able to advise without working with international tax planners, accountants, lawyers and often auditors.
THE PREREQUISITES NEEDED TO DE-ENVELOP RESIDENTIAL PROPERTY
- The property should not be encumbered, subject to a mortgage, loan or any other instrument that would give a 3rd party rights over the asset;
- There should be sufficient distributable reserves available to allow for the original corporate owner to make such a distribution without compromising its own integrity;
- There must be a clear audit trail showing that the ultimate beneficial owner (or owners if applicable) is/are indeed entitled to the property asset;
- It must be technically possible under the internal governing instruments for a specific asset to be distributed to shareholders and/or equity holders as appropriate.
THE MOST COMMON STRUCTURAL & DRAFTING REQUIREMENTS/ISSUES
- It is likely that the existing memorandum and articles of association or their equivalent be redrafted and re-submitted;
- All legal documents should be apostilled and/or legalized once in their correct and final format;
- There should be a clear link between the ultimate beneficial owner and the corporate property owner;
- The ultimate beneficial owner shall need to satisfy all normal KYC and MLA requirements;
- There will need to be a clear accountancy audit trail with proper (normally audited) accounts being available from the property asset acquisition date;
- There preferably should be no overhead trust or private interest foundation or this could create a personal tax event which would be counter-productive;
- The property will need to be assessed for its current market value by 2 or 3 independent surveyors and/or estate agents
Apart from the above, there can be a host of other technical issues that can arise when de-enveloping a property which could include, for leasehold properties, property management firms and/or freeholder rights or indeed a large number of variables such as whether distributions are made on an interim or final basis.
PRIORITY ENQUIRY FORM
(Strictly Confidential No Obligation)
Omega Building, 1st Floor Offices, Riverside West, Smugglers Way, London SW18 1AZ, UK
Telephone : + 44 (0) 20 7731 2020 Email : email@example.com
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A FULL RANGE OF PROPERTY DE-ENVELOPING, ACCOUNTANCY & TAX PLANNING SERVICES
De-enveloping.co.uk is part of The SCF Group of Companies and has been specifically set-up to assist those who have purchased London and UK properties using previously tax efficient offshore or international business companies but now find that the annual Advanced Tax on Enveloped Dwellings (ATED) is too high to economically maintain on properties worth over £500,000.00 AND do not want to be subject to Stamp Duty Land Tax (SDLT) when transferring a company held property to themselves.
It should be noted that generally it is not economically viable to de-envelope properties below £750,000.00 but as the ATED tax thresholds are very punitive it becomes almost compulsory (where possible) for properties worth over £1,000,000.00 with very substantial savings coming into play for properties worth over £2,000,000.00.
The services offered by The SCF Group combine almost 25 years of offshore and tax planning experience which enable the firm to correctly prepare, amend, legalize or otherwise prepare a company for tax free conveyancing in conjunction with our specialist conveyancing solicitors. For those with properties worth £2 million or more the cost of de-enveloping is often less than 1 year’s ATED Tax.
It should be noted that not all properties can be de-enveloped including properties that have received 3rd party funding or are subject to encumbrances. In addition, generally commercial properties are exempt from ATED as are those that are carrying out genuine UK property management services, which for the purposes of clarification does not simply mean renting out a property using a UK estate agent but actually carrying out property management in the UK with profits subject to UK corporate and value added taxes.
ACCOUNTANCY & TAX PLANNING
In addition to property de-enveloping services The SCF Group also provides a wide range of tax planning, accountancy and company formation services both within the UK and internationally including wealth protection trusts and private interest foundations. For more information on the main SCF Group please go to our ‘Mother’ Website www.scfgroup.com.