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Offshore ownership investigation

/ 27 November 2012

A Guardian investigation into offshore firms has revealed the real identities behind secret UK property deals by companies registered in the British Virgin Islands (BVI). The paper teamed up with the Washington-based International Consortium of Investigative Journalists to examine 60 sample premises registered to companies in the BVI.

It lists the real names of a host of people who own properties ranging from large commercial premises to a small hotel in Essex.

The paper says that in 2011 alone, more than £7bn of off-shore money flooded into potentially tax-exempt purchases of UK houses, flats and office blocks, with the majority of transactions taking place in central London.

It notes that the offshore investment area is the driving force behind the capital’s spiralling property prices in comparison to the rest of the UK. The paper cites research from Knight Frank which found that since 2009 property prices in prime central London have increased by 49%, five times more than the national average.

The Guardian believes that three major tax loopholes are fuelling the offshore property boom. It says offshore investors are attracted to the UK by the fact; they can legally avoid inheritance tax by buying a house in the name of an offshore entity; they can avoid up to 5% of stamp duty buy owning the property via an offshore company; and upon sale of the property company shares are transferred, not the house, allowing a 0.5% duty saving on share transfers.

Source: The Guardian

We say: the Guardian is a bit behind the times (no pun intended). Two of these “loopholes” are being countered – see here. More to the point would be the extension of UK CGT to gains made by non-residents on UK real estate, which would level the playing-field as between resident and non-resident investors and the continuing absence of which is increasingly baffling.