UK Real Estate Structuring

Verfides has developed considerable experience and expertise in the tax-efficient structuring of UK real estate acquisition and development—both commercial and residential. We bring together our expertise in UK and international taxation, trusts and company formation and management to provide a bespoke service for real estate investors from all over the world.

It is essential to take professional advice from the outset, as UK real estate transactions are potentially exposed to a variety of UK taxes:

  • Income tax on rents
  • Income or corporation tax on development profits
  • Capital gains tax on sale or reorganisation
  • Stamp Duty Land Tax on acquisition
  • Inheritance tax (IHT) on death or gift (or periodically for trusts)
  • Annual Tax on Enveloped Dwellings (ATED) for residential properties
  • Construction Industry Scheme obligations
  • VAT on commercial transactions

We help investors and developers navigate through complex tax law to ensure that the most tax-efficient structure is chosen for investing in, developing and holding UK real estate. In many cases certain taxes can be mitigated or entirely eliminated through careful planning and structuring from the outset.

Residential and Commercial Rental Properties
Private Residences
Property Developments
Collective Property Investment Schemes
Investment Structures for Real Estate
Tax Compliance and Accounting Services for Real Estate

Residential and Commercial Rental Properties

Although the tax treatment of UK rental receipts may initially appear straightforward, there are many planning opportunities. Our advice would typically focus on:

  • Limiting income tax rates and liabilities on rental streams, through the use of an appropriate holding vehicle
  • Securing exemption from UK capital gains tax on a future sale
  • Securing maximum tax-deductible expenses, particularly in the form of loan interest in respect of investor loans
  • Eliminating UK withholding taxes on interest payments
  • Enabling UK resident non-domiciled individuals to remit non-UK income and gains tax-free to fund a commercial rental business
  • Eliminating or reducing exposure to UK IHT
  • For residential property, advising on securing an exemption from the ATED regime for property being let or developed on a commercial basis
  • VAT advice including advising on Option to Tax for commercial or mixed-use buildings

Private Residences

The purchase of residential property for owner-occupation may require specialist tax considerations, particularly at the higher end of the market. New tax rules for residential properties held through companies have served to make this area more complex so that our advice often focuses on:

  • Advising on the reduction of IHT exposure
  • The ATED regime and applicable exemptions
  • Capital gains tax mitigation, including advising on the applicability of Principal Private Residence Relief to individuals and trustees
  • Minimising risk with regard to Shadow Director and benefit-in-kind issues for private occupation within certain structures
  • Advising on the tax position of family trusts, often non-resident, particularly where there are UK-resident beneficiaries occupying UK trust property

Property Developments

With property developments, tax exposure will be in the form of trading profits rather than capital gains. We frequently advise on:

  • Eliminating or reducing UK income or corporation taxes on short-term developments through the use of appropriate structures using tax treaty planning
  • Advising on the implementation of UK-based property development arrangements for foreign developers without compromising overall UK tax exposure.
  • Construction Industry Scheme obligations
  • VAT recovery on development projects

Collective Property Investment Schemes

As a result of the increasing desirability of the UK property market globally, collective investments have become a popular choice for investors looking to pool capital and risk. We advise principally on:

  • Bespoke collective investment schemes for small groups of sophisticated investors
  • Advising on the appropriate collective investment vehicle to achieve optimum tax efficiency, both at the level of the UK investment and at investor level
  • Advising investors on maximising double tax relief claims in respect of UK tax liabilities
  • Minimising tax at UK level through structuring investor borrowing
  • Advising on any UK regulatory issues for collective investor schemes

Investment Structures for Real Estate

Verfides provides not only initial tax structuring advice but also a seamless service by forming and managing the investment vehicles chosen, including:

  • Companies, both in the UK and overseas, including in EU and non-EU low tax jurisdictions (both to own property beneficially and as nominee)
  • Limited Partnerships in England, Scotland, Ireland and elsewhere
  • UK Limited Liability Partnerships (LLPs)
  • Private funds for bespoke collective investment schemes which often benefit from tax exemption at fund level
  • Trusts, including the provision of professional trustees in a number of jurisdictions

Verfides also provides a full range of nominee and statutory services to the companies we administer, including company directors, nominee shareholders, company secretaries, registered office and registered agent services.

Tax Compliance and Accounting Services for Real Estate

Verfides offers a full accounting and UK tax compliance service to property investors through its team of qualified accountants and tax consultants. All individuals letting or developing UK property will have UK tax filing obligations (whether or not any tax is due). All entities should prepare accounts, whether or not required by statute in the jurisdiction of incorporation, for tax and corporate governance purposes.

Non-Resident Landlord Scheme (NRLS)

The NRLS is the mechanism by which HMRC collects the tax due on the UK rental income of non-resident landlords, whether individuals, partnerships or other legal entities. The scheme requires UK letting agents or tenants to deduct basic rate tax (currently 20%) from rental income due to non-resident landlords and to pay this tax over to HMRC on a quarterly basis.

Rather than suffer this cash-flow disadvantage, and the possibility of overpaying tax, it is possible to apply to HMRC for approval to receive UK rental income with no tax deducted. Verfides assists many clients with successful applications under the NRLS to receive rents gross.

Annual income tax/corporation tax returns

Whether or not a landlord is receiving rents gross of tax, an annual UK income tax or corporation tax return must be filed, irrespective of whether tax is due. This applies for resident and non-resident individuals, companies and other entities.

Verfides registers landlords with HMRC and takes care of their annual tax filings. It is important that professional advice is taken as the computation of rental profits must follow UK generally accepted accounting principles and there are significant reliefs which can be claimed if properly advised.

VAT advice, registration and compliance (including Option to Tax)

Verfides can provide advice on all VAT issues in respect of the acquisition, development and sale of property. Where appropriate we may advise that a landlord “opts to tax” a commercial or mixed use building in order for input VAT to be reclaimed, and we arrange the application to HMRC in respect of the option to tax.

Verfides also provides VAT compliance services including VAT registration, the provision of a VAT agent, preparation and filing of VAT returns (often quarterly, but even monthly where this expedites cash-flow on VAT reclaims) and liaising and corresponding with HMRC including handling VAT inspections.

Annual Tax on Enveloped Dwellings (ATED)

Most UK residential properties owned by companies and some other non-natural persons are subject to an annual tax charge which can be substantial unless they qualify for one of the exemptions available.

Entities falling within the ATED regime are required to file an annual ATED return even if they qualify for one of the exemptions from the tax charge. Verfides arranges annual ATED filings and the claiming of applicable exemptions.