How to Distribute UK Residential Property from Offshore Companies

When distributing UK residential property from an offshore property holding company into
the names of the beneficial owners or shareholders of the company, it is important to
consider the various UK tax implications relevant to the distribution option.

Generally, there are two distribution options to choose from: a distribution in specie or a
transfer through liquidation or wind-up.

Before you decide which option to take, you need to confirm if the company’s articles of
association provide for the directors to select that option.

If not, then a special resolution could be implemented to amend the articles. Remember to
also consider any statutory requirements regarding asset disposal in the jurisdiction of the
offshore property holding company. For example, Section 175 of the BVI Business Companies
Act, 2004, needs to be considered for BVI-registered companies.

1. Distribution in specie (distribution in kind)

  • If the company has no external debt (e.g. a mortgage where the lender has a
    registered charge over the property), Stamp Duty Land Tax (SDLT) will most likely not
    be charged.
  • Her Majesty’s Revenue and Customs (HMRC) usually disregard shareholder loans as an
    assumed liability on the transfer of property to the shareholder.

Important: There are still more considerations to take into account, especially whether or not
existing debt must be removed prior to de-enveloping a UK residential property.

2. A transfer through liquidation or wind-up of the company
A transfer through liquidation would likely not attract SDLT since no consideration on the
property value is involved.

Important: Regardless of this exemption, you should always seek out further tax advice to
prepare for any issues that might arise in the applicable jurisdiction, especially where
corporation or capital gains taxes apply.

In both scenarios, a transfer of UK residential property is ordinarily considered as a deemed
disposal at market value in the UK.

Chat to us for advice on transfers
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