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Tax planning

Tax planning

Hello

I wonder if someone can advise on this proposed scheme which was suggested to me:

Mr A and Mrs A are directors of a Jersey company, say company X. Mr A sells his property (not PPR) to the Jersey company.

The Jersey company leases the property to a UK company, say company Y, of which Mr A is the director. The company Y rents out the property, the rental income under the arrangement being a commercial rent, but the cost of the lease from the Jersey company should eat up most of the income.

I suppose the idea is to shift the income to the Jersey company....

To tax specialists, who have this sort of stuff for breakfast, can you comment? And what is the current line of thinking on control and management vis-a-vis company residence?

Thank you in advance.

SA

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By okevin
06th May 2011 17:18

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Do you not have a non resident landlord position.?

The location of the property will mean that UK tax is due on  the rent.

 

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By tristan
09th May 2011 08:00

Lots of issues

If Mr & Mrs A are UK residents then the Jersey company is probably UK resident too. If it's not UK resident then you have transfer of asset abroad issues to consider (i.e. the income of the offshore company being taxed on the UK shareholders who can benefit from the income or who made the transfer). And as pointed out previously if the Jersey company is non-UK resident and is receiving rent from a UK property then it will pay 20% income tax on the rent. 

And even if you could get it to work, you've still got to get the income out of the Jersey company to the shareholders at some point. If they are UK resdient they will be taxed on that receipt. 

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09th May 2011 12:59

Thank you...

Yes, thanks for pointing me in the right direction.

Lots of issues!

SA

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