“Plans are of little importance, but planning is essential.”
― Winston Churchill
What is it?
Changes brought into effect in April 2017 saw new tax rules for non-UK domiciles facing inheritance tax (IHT) liabilities on assets owned in the UK. This includes residential properties owned by a company or trust, sometimes referred to as ‘enveloped dwellings’. In addition to paying IHT liabilities, enveloped dwellings are also liable for ATED (Annual Tax on Enveloped Dwellings).
£500,000 - £999,999
£1m - £1,999,999
£2m - £4,999,999
£5m - £9,999,999
£10m - £19,999,999
More than £20m
What are the options available if you have a property owned by an overseas company?
Sell the property
You could choose to sell the property as a way of removing your IHT liability, however this still means you pay the Capital Gains Tax (CGT) and Corporation Tax in addition to ATED. It could be more cost-effective and simpler for you to keep the property and pay for IHT cover?
Gift the property
Gifting your enveloped property could be a viable solution, however this would also trigger ATED-related CGT and Corporation Tax. On the other hand, depending on whom you gift the property, there is a possible exemption of IHT on the transfer of the property.
Keep the property
If you choose to keep the property, you may wish to consider removing the property from envelope as this may removes the need to pay ATED, however it could be quite costly to transfer the property out of the envelope and leaves IHT liability in place. Either way, IHT cover required.
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