De-enveloping properties held in corporate wrappers

De-enveloping properties held in corporate wrappers

Wed 26 Jul 2017

We now know that inheritance tax benefits previously associated with the use of corporate structures to hold UK residential property will be removed with effect from 6 April 2017. The new rules treat the interest in the holding entity as subject to UK IHT. Previously it could be exempt in the hands of a non-UK domiciliary.

Laptop-user-holds-houseThis removes one of the remaining tax benefits of holding UK residential property in a corporate envelope. Before this change we had ATED annual charges.  On the CGT side ATED –CGT, and no access to Principal Private Residence Exemption.  All of this in some cases was felt to be a sensible trade-off for IHT exemption.  With this gone, from a tax perspective at least, holding property in this way gives almost the worst of all worlds.

De-enveloping therefore looks like a good idea if it can be achieved without too high a tax cost. There are no particular reliefs available to encourage it – maybe the government wanted to continue to get the ATED annuity rolling into the Treasury? However the longer you leave it the more expensive it is going to become to unwind.

For further information please contact Lindsay Pentelow – Lindsay.Pentelow@mazars.co.uk

 

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