Real estate investment has long been the keystone of an investment portfolio for wealthy individuals, family offices and corporate investors.
The historic returns speak for themselves, but there are challenges to investing into this asset class, most notably the critical importance of keeping up to date and complying with the reams of compliance and tax obligations. Consequently, shareholders and directors need to seek the right guidance and advice to fully understand the implications for their investments.
There is no denying that the much changed UK tax landscape has reduced the appeal of offshore corporate ownership of UK property from a tax perspective. The most recent example of this being the changes to how offshore corporate landlords will be taxed in the UK from April 2020. This has led to some investors understandably contemplating whether an offshore structure is still worth it. However, there are a number of factors, other than taxation, that should be considered.
Offshore corporate landlords are normally administered by a professional corporate service provider (CSP) and there are a multitude of benefits to this.
CSPs have teams of professionals who administer real estate portfolios across all market sectors, whether that be commercial, residential, retail, leisure or mixed use. With this comes experience working with bespoke structures tailored to the requirements of the investor as well as a strong network of professional real estate advisors to call upon when required. Most importantly, they are cost efficient.
A good CSP will provide a multitude of cost efficient services to the investor, such as accounting, cybersecurity management, legal support, tax and VAT advice, company secretarial function, and payments and receipts compliance. They will also provide administrative support with the timely execution of documents, handling of insurance requirements, liaising with property managers and dealing with regular payments. This cost efficiency increases in significance as the value of the investment increases. If one was to source each of these services individually the costs could well become unrealistic for the investor.
With an efficient CSP administering the ownership vehicle, providing high standards of corporate governance and maintaining accurate, timely information, the opportunity to sell at the right time becomes paramount. In most cases a sale will be done by way of a share transfer of the offshore corporate entity. An international buyer will most definitely request due diligence on the entity and in most cases having an offshore corporate entity is very attractive to an international buyer. A good CSP will handle this request in a timely and suitable fashion, not hindering the sale negotiations in addition to confidentially interacting with the advisors for both the seller and the buyer. This is when the value of a good CSP becomes evident.
In summary, while there are questions around whether an offshore corporate entity is the most tax efficient structure available, real estate investors should consider the wider benefits a CSP can bring, including increased cost efficiencies, added value to the management of the asset and most importantly assistance with divesting the asset when the time comes.
At Equiom, our dedicated real estate teams are made up of experienced and highly skilled administrators, providing multijurisdictional support, with high standards of corporate governance. We benefit from established relationships with international real estate advisors which combine with extensive in-house expertise to provide a comprehensive service offering.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it.