Offshore firms slowly sell off property in UK – but there’s a long way to go

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Offshore companies have been selling their UK real estate after a multi-million pound tax crackdown – but only just.

New figures from the Land Registry show fewer properties in the UK are owned by companies registered overseas than at the start of 2018.


As of May 2019, there were 96,248 properties owned by offshore companies, compared to 97,227 in January 2018.

In that time, 9,916 properties were sold to UK companies or individuals, and 8,937 were newly purchased by a foreign company.

It’s only a slight decrease of 1% – or 979 properties.

But a campaigning MP has claimed even this drop may suggest new tax laws are having an effect.

Prior to April this year, a legal loophole meant that foreign companies did not have to pay corporation tax when they made money selling commercial real estate.  

In November 2017, it was announced that from 6 April 2019, non-resident investors would pay the same rate of Capital Gains Tax (currently 20 per cent) as their UK counterparts on any sales realised after that date.

At the time of the announcement, the government said their objective was to “level the playing field” between UK resident and non-resident investors.

However, certain countries are exempt from the change to tax law – including Luxembourg, which has a “double tax treaty” with the UK preventing the taxation of property gains.

 


 

The government has stated that it intends to renegotiate and amend double tax treaties such as these, and discussions are due to get underway this year. 

The amount of real estate owned by companies registered in Luxembourg has gone up at the same time as overall foreign-ownership has gone down, rising from 2,270 properties in Jan 2018 to 2,745 in May 2019.

Stella Creasy, Labour and Co-operative MP for Walthamstow, lead the campaign in 2017 to make overseas companies pay the same Capital Gains Tax as those in the UK.

She said: “These figures do show that things have changed since the tax law was changed, but the worry is what’s happening in Luxembourg.

“We can’t say whether or not companies are exploiting this loophole, but the fact that there’s been such a marked increase in the amount of real estate owned by companies in Luxembourg shows that we need an urgent investigation into what these companies are doing.

“If people aren’t registering in the UK and are instead choosing to register in Luxembourg, this will make a huge difference in terms of tax – that’s a lot of cash.

“The whole point of changing the law around Capital Gains Tax was to give a level playing field, but while this loophole still exists we can’t say we’re doing that yet.”

Despite the decrease in number, foreign-registered companies still own properties and land in the UK worth at least £73.9 billion – and likely far more.

The most expensive real estate bought by an offshore company in the country, where we know the price, was the Blue Fin Building in Southwark, London.

The property was bought by Blue Fin Office Propco Limited – registered in Jersey – who paid £448,500,000 for the events and meeting space.

Similarly, land at Hawick Crescent Industrial Estate in Newcastle was bought for £448,300,979 by United UK Propco 5 S.A.R.L, a company which is registered in Luxembourg.

However, this land was already owned by a foreign company at the start of 2018 – Dooba Investments III Limited, who were registered in Cyprus at the time.

Of the real estate that is now owned by foreign companies but was not in January 2018, the next-most expensive was 1A and 1B Poland Street in Westminster, London.

The flats were purchased by 30 Broadwick Lux S.A.R.L. – a company registered in Luxembourg – for £185,837,186.

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