Offshore
Investment Strategies
Look through legislation
Here come the catches. Most of them apply to all uses of offshore
companies, rather than just to the tax-efficient ownership of
UK property. The first and biggest is look-through. Many jurisdictions
have enacted so-called ‘look-through’ legislation,
whereby they can look through company (and trust, and other)
structures to identify the chain of benefit linking the underlying
asset (the property, in this case) with the beneficial owner
(you, as shareholder).
Offshore Investment Strategies - Spanish Tax
The best-known example of look-through is the Spanish tax
status of Spanish property. To cut a long story short, UK expatriates
living in Spain used to own their beach-front apartments through
offshore companies, and thus did not pay any tax on them. But
the Spanish tax authorities looked through such arrangements,
found beneficial owners living in underlying assets, and taxed
accordingly.
It is more tax-efficient, these days, to own your Spanish property
directly. With UK-sited assets, and not just property, similar
look-through legislation is available, although it has not been
used to the same dramatic effect as in Spain. That, sadly, might
soon change. From 1 January 2001, there will be a new statutory
offence in the UK of tax evasion. The cunning point is that
it will be tried before magistrates. Now, magistrates are fine,
upstanding people, but (to generalise unfairly) some of them
might not have the same ability to enjoy listening to tax lawyers
that high-court judges tend to display. After 1 January 2001,
the risk is that your tax-efficient offshore structure will
be taken before a magistrate, who will apply common sense to
deciding whether or not it constitutes tax evasion.
Offshore Investment Strategies - A fine Line
There’s a fine line here, and if you’ve done something
legal, you can expect not to be treated as a criminal; but the
key point is not to set out with the specific intention of not
paying a tax bill that you know you should pay. Most offshore-company
professionals will tell you that the best reason to set up an
offshore company is to ease the administration of your affairs.
If you have built up assets in a range of jurisdictions, you might
find it useful to have them owned by one or more companies in
a single jurisdiction. Get that organised and, for example, you
can sell them simply, or your company can be administered by an
offshore professional while you’re busy working to earn
more assets.
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