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Inheritance Tax To Be Charged On Property Held In Offshore Trusts From April 2017?

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Am I reading this right (that UK properties held in offshore trusts that previously weren't liable for IHT will be from April 2017)? If so, won't this have a big impact on the London market considering so many properties are held in offshore trusts? http://www.theguardian.com/uk-news/2015/mar/04/uk-properties-held-by-offshore-firms-used-in-global-corruption-say-police

In London alone, 36,342 properties are held in offshore companies in secret jurisdictions, according to data released to TI by the Land Registry. The favourite locations to hold the assets are the BVIs, Jersey and the Isle of Man.

Changes announced in the budget; https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442986/Technical_Briefing_on_Non_Dom_IHT.pdf

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Am I reading this right (that UK properties held in offshore trusts that previously weren't liable for IHT will be from April 2017)? If so, won't this have a big impact on the London market considering so many properties are held in offshore trusts? http://www.theguardian.com/uk-news/2015/mar/04/uk-properties-held-by-offshore-firms-used-in-global-corruption-say-police

Changes announced in the budget; https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/442986/Technical_Briefing_on_Non_Dom_IHT.pdf

Easy to get round with five minutes of thought. Hold the property in a trust with the beneficiaries being able to use, but not own. No IHT when they die.

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Easy to get round with five minutes of thought. Hold the property in a trust with the beneficiaries being able to use, but not own. No IHT when they die.

In UK, anything stuffed into a discretionary trust... liable to capital gains tax and income tax. (eg property and rental income). That's my understanding. http://www.hwfisher.co.uk/features-of-a-discretionary-trust/ Have become a bit less popular since individual relief to £650K for married couples (of course rising by 2020 to £1m for 'family home' - with inclusion of relief transferring over for downsizers).

Non-doms do seem to have been tagged in this Budget. Reading fru-gal's link.... that's some heavy messing from what I can tell.

8. The government intends to amend the rules on excluded property so that trusts or individuals owning UK residential property through an offshore company, partnership or other opaque vehicle, will pay IHT on the value of such UK property in the same way as UK domiciled individuals. The measure will apply to all UK residential property whether it is occupied or let and of whatever value.

9. The government does not intend to change the IHT position for non doms or exclude property trusts in relation to UK assets other than residential property, or for non-UK assets. Nor will these reforms affect people who are domiciled in the UK

And do they even get to qualify for 'Family Home' IHT allowance higher rate (rising to £1m 2020) as non-doms or offshore companies for a residential home/property owned? Or is it held at £325K? (Is it even £650K transferable between non-dom spouses? Surely not directors in an offshore company).

Edited by Venger

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I think this would have a bigger effect on PCL than the BTL changes. If you make holding a London property unattractive from a tax perspective (and don't forget even before this they were already getting aggressive with things like ATED, SDLT, CGT for foreign residents, sending the message that the foreign rich are now a target) then sentiment falls away. There has also been a lot of negative press recently about foreigners laundering money through PCL and it would appear that such articles are now hints via the press that the Government has its eye firmly on such setups.

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In UK, anything stuffed into a discretionary trust... liable to capital gains tax and income tax. (eg property and rental income). That's my understanding. http://www.hwfisher.co.uk/features-of-a-discretionary-trust/ Have become a bit less popular since individual relief to £650K for married couples (of course rising by 2020 to £1m for 'family home' - with inclusion of relief transferring over for downsizers).

Non-doms do seem to have been tagged in this Budget. Reading fru-gal's link.... that's some heavy messing from what I can tell.

And do they even get to qualify for 'Family Home' IHT allowance higher rate (rising to £1m 2020) as non-doms or offshore companies for a residential home/property owned? Or is it held at £325K? (Is it even £650K transferable between non-dom spouses? Surely not directors in an offshore company).

Am no expert on off-shore trusts but if the trust is for the benefit of named individuals, so of whom may be the heirs, I don't get how toys works. Trusts are not actually "owned" in a legal sense so it seems tricky to tax them as being so for IHT purposes. Anyone understand?

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Am no expert on off-shore trusts but if the trust is for the benefit of named individuals, so of whom may be the heirs, I don't get how toys works. Trusts are not actually "owned" in a legal sense so it seems tricky to tax them as being so for IHT purposes. Anyone understand?

exactly.

A non-UK trust owning a property in the UK. Who 'dies' to trigger IHT? No one. CGT only kicks in if you sell (easier to borrow against the value - no sale point, no CGT. Income - well, if the trust just lets a beneficiary use it and charges a peppercorn rent.....

I'll say it again - these changes will only catch the middle classes and lesser rich who cannot afford good tax advice

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exactly.

A non-UK trust owning a property in the UK. Who 'dies' to trigger IHT? No one. CGT only kicks in if you sell (easier to borrow against the value - no sale point, no CGT. Income - well, if the trust just lets a beneficiary use it and charges a peppercorn rent.....

I'll say it again - these changes will only catch the middle classes and lesser rich who cannot afford good tax advice

This tax move is targeted at non-doms who may already indirectly hold a UK residential property through an offshore trust. Normally the trust would be liable to UK IHT on any UK assets held within it, but by holding the property indirectly via a non-UK company ('enveloping') the IHT liability could be avoided.

The proposed legislation intends to bring UK residential property into the IHT net whatever the strategy.

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I think this would have a bigger effect on PCL than the BTL changes. If you make holding a London property unattractive from a tax perspective (and don't forget even before this they were already getting aggressive with things like ATED, SDLT, CGT for foreign residents, sending the message that the foreign rich are now a target) then sentiment falls away. There has also been a lot of negative press recently about foreigners laundering money through PCL and it would appear that such articles are now hints via the press that the Government has its eye firmly on such setups.

This tax move is targeted at non-doms who may already indirectly hold a UK residential property through an offshore trust. Normally the trust would be liable to UK IHT on any UK assets held within it, but by holding the property indirectly via a non-UK company ('enveloping') the IHT liability could be avoided.

The proposed legislation intends to bring UK residential property into the IHT net whatever the strategy.

Heavy messing !

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Russion Boris and his blonde bint on the Channel 4 documenatry last night will probably still find a way around the laws :lol::lol:

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