Seminar told: Mansion Tax will affect Jersey trusts and companies

James Qualtrough | August 7, 2012 | 0 Comments

Jersey could lose business because of tax changes that the UK Government is introducing next April, a tax expert has told the trust industry.

Speaking at a presentation in Jersey, Lindsay Pentelow, Tax Partner at Mazars, told an audience from the trust services sector that the UK Government planned to generate revenue through an additional tax on high value residential properties (a mansion tax) which were held by trusts and companies.

He said: “The central issue for the financial services industry in Jersey is to ensure that their clients can avoid the punitive element of these changes and can provide the best alternative structures for those affected.”

A consultation paper recently set out the UK Treasury’s proposals to ‘ensure the fair taxation of residential property transactions’, with the intention of discouraging the ‘enveloping’ of properties within a corporate or similar package, that is holding UK residential properties worth over £2m in companies and other ‘envelopes’.

The first step was the introduction of a new 15% rate of Stamp Duty Land Tax on properties acquired by these structures. Additional measures proposed to take affect from April 2013 include:

an annual charge based on property values of up to 0.75% of the value or £140,000 annually, and
extending UK capital gains tax charge to the disposal of properties which would otherwise be non-taxable

Mr Pentelow told the audience that for many years UK properties had been held by individuals through offshore structures for various tax benefits but that they now needed to look at how they could efficiently ‘de-envelope’ their properties to avoid the annual charge and future capital gains.

There would be different solutions depending on the structure used (company, trust or both) and the status of the beneficiaries (whether they are UK domiciled, UK resident or non-UK resident and non-UK domiciled). Equally, there were a range of alternative structures which could be used to maintain benefits, he said.

‘All affected taxpayers should be seeking preliminary advice during the summer so as to map out the likely steps to be taken,’ Mr Pentelow said. ‘We will have final HMRC proposals in the autumn to come into effect at the end of March 2013, which leaves a narrow time frame in which to take action. Mazars have developed a number of alternative approaches to holding UK properties in these circumstances and we are recommending that everyone considers this and thinks about their options now.’