Abacus was approached by an intermediary who had a non UK resident client looking to take advantage of the fall in value of the UK property market coupled with the strengthening of his home currency against sterling.

The individual was close to agreeing terms to acquire a Mayfair property that he and his family would use on their occasional visits to London and a Knightsbridge property that would be let as a commercial investment.

We were able to meet with the intermediary and the client and suggest that an Isle of Man structure would provide significant tax efficiencies and protection that the client’s personal ownership could not.

An Isle of Man company was formed with Abacus acting as directors of the company, this enabled us to step into the client’s shoes and conclude the purchase of the properties in the name of the company. The client became the shareholder of the company (but it could have been a holding company or trust representing the client).

As a result of the strategic change in the ownership structure the following was achieved:

1. The value of the properties are now outside of a charge to UK Inheritance Tax, which would have been levied at 40% of the market value of the properties (less any borrowings) on the client’s death. The Isle of Man does not levy Inheritance Tax.
   
   
2. The properties remain outside of a charge to UK Capital Gains Tax and the Isle of Man does not levy Capital Gains Tax.
   
   
3. The net rental income from the let property is now subject to UK tax at 20%, rather than rates up to 40% where held personally.
   
   As the client was able to partially self finance the acquisition of the let property an additional element was added to the structure whereby a significant part of the UK taxable rent was re characterised as interest not subject to UK tax.
   
   The interest income was of course subject to Isle of Man tax but from 6 April 2006 the Isle of Man introduced a 0% standard rate of tax for companies. Therefore no actual tax was paid.
   
   
4. Abacus as directors of the Isle of Man company were able to engage a specialist law firm to reduce the Stamp Duty Land Tax charge of 4% down to 1½%.