Tax Avoidance & London’s High End Property Market
Through a video expose’ created from a legal dispute regarding planning permissions between a world renowned night club and a high end developer; the well-known (through inner circles) method of purchasing through offshore vehicles has come to light.
Oakmayne the developers of an ultra luxurious row of terraces in Cornwall Terrace, Regents Park (just down the road from me) have become the unfortunate whipping boys in recent weeks as amidst the Treasury clamping down on tax avoidance and “off-shoring”, they had since 2007 bought a number of properties through a series of companies based in the Isle of Man known as Special Purpose Vehicles (SPV’s). The video which can be found on the Guardian website shows the sales director explaining to the client that purchasing the company which owns the property rather than buying the property itself would allow them to negate the stamp duty fees which would have been in the region of £1.35mn on the £27mn home. This works as the purchase of the SPV being offshore leaves no indication to the UK authorities that the property changed hands through the land registry allowing the avoidance of the tax.
This route can also benefit the developer as they maybe able to secure a higher selling price than would otherwise be possible as no stamp duty would be paid and conversely it could allow for a quicker sale by virtue of the lower price. While still entirely legal, the initial purchase of any residential property worth over £2m by a company now attracts a punitive rate of stamp duty of 15%, intended to make setting up such structures uneconomical for developers.