The primary factor to take into consideration when planning a purchase structure is the tax implications for any current or future beneficial owners. Every client profile is different and as such the following are typical strategies:
Property acquired in personal names is the most conventional approach. Typically, this route allows the most leverage, lender choice and lowest cost. This remains a mainstay of the lending market but with recent tax legislative changes, clients are looking to acquire and even transfer their existing properties into a LTD Co Structure for tax efficiency, particularly those who are higher tax rate payers.
Limited Company loans have been available in the mainstream retail and corporate lending market for over a decade and have become more popular based on the aforementioned tax changes. There are many benefits to owning property in a Ltd company but the increased cost of finance and reduced lender choice reduces options. We do see this evolving during the coming months as lenders increase exposure in this specific market segment.
Funding aimed at individuals or companies based offshore but wish to buy property in the UK. The entities that grant such loans are often offshore banks or a specific department of UK banks based offshore. They serve little benefit if you are UK resident and UK-domiciled. They could however, be suitable if you are UK resident but non-UK domiciled or not ordinarily resident for UK tax purposes. It could also suit you if you are non-UK resident i.e. a foreign national or expat residing outside of the UK.
If you do not wish to bring funds into the UK due to tax implications, an offshore mortgage structure can be used to purchase UK property.
An offshore mortgage is a particularly complex product but we have many years of experience in this specialist area. We can discuss the merits of relocating a loan structure to an overseas financial jurisdiction, such as and not exclusively, Jersey, Guernsey, the Isle of Man or British Virgin Islands etc.
Carbon advises and strongly recommends working in tandem with client’s accountants and tax advisors to ensure any solution is thoroughly compliant with a wider tax strategy.
A trust is a structure that enables an individual or a company, known as the trustee, to hold certain assets on behalf of another individual or group of people (otherwise known as the beneficiary) on either an onshore or offshore basis. The trust itself is not actually a separate entity akin to a company but rather a legal relationship between the trustee and the beneficiary.
A trust is governed by a trust deed which will set out any rules in which the trustee is advised to act on behalf of the beneficiary.
There are several benefits when borrowing in a trust structure, predominantly being, that the beneficiary is not the legal owner. If the beneficiary incurs financial difficulties it will not impact on the asset in the trust. In addition and potentially most popular benefit is the potential inheritance tax advantages, enabling assets to be passed between family members in a more tax efficient manner.
Lending to trusts is more common with high and ultra high net worth individuals and is therefore a more specialised arena. Given our place in the market, we engage with many lenders both onshore and offshore that are very comfortable to lend to such structures.
It must be noted that the KYC and due diligence process required to lend to trusts is onerous and requires full disclose of all trustees and beneficiaries involved.