Beneficial Interest Company Trust

[AT]

I have a query in relation to the above. I am of the understanding that if one holds a legal title to a land/property in the UK on Land Registry, and if that person may wish to 'nominate' another 'person' to hold the beneficial interest in that property that this can be done by way of setting up a trust deed. In effect, if there is a landlord who holds the legal title, the landlord can 'split' the beneficial interest from the legal owner. In splitting this, the beneficial interest would now be held by a corporate structure in the UK (Limited Company). Given that the beneficial interest is now held by the company, any income that may flow from the property would be taxed by the beneficial owner given that taxation follows beneficial interest. Is my understanding in what I have stated correct? If it is correct, can anyone suggest how one might go about setting this up. If my understanding is incorrect, can anyone suggest how so please?

[AGoodman]

Yes, you are correct, the current legal and beneficial owner of a freehold can declare himself a nominee for another person, including a company. For tax purposes, that is the same as a transfer of the legal title.

This is also possible for leases provided there is no restriction in the lease.

However, do not forget that the step is also the equivalent of a transfer for all tax purposes, which means that the transfer itself will likely be a transfer for SDLT for deemed market value consideration, could be a chargeable transfer for IHT (unless the transferor is also the 100% owner of the company) and will be a disposal at deemed market value for CGT.

Depending on circumstances, it could well trigger an SDLT and a CGT charge. Lifetime IHT also possible if the company is not 100% owned and the nil rate band exceeded or fully utilised.

As you say, the owner would make a declaration of trust. A simple document but you should get a professional to draw it up.

[AT]

Hi
Thank you for the swift reply which is appreciated. Thank you for confirming my understanding as being correct. In relation to the CGT on the transfer of the beneficial interest of the property from the current legal owner to the new corporate owner, the legal owner would need to account for the CGT, and the new beneficial owner (the company) would be accounting for the SDLT on its new purchase. However, would any incorporation relief be available in such a transaction? If so, how might that work?

[AGoodman]

Outside of my knowledge I'm afraid but I doubt it unless it forms part of a transfer of a trading business

[AT]

Hi
Thank you, although I can say that the transfer would be in relation to a trading business.

[AnthonyR]

Assuming that this is a trading business that owns an office or factory and the building is used in the trade and is part of the business, I don't see there being an issue in incorporation relief being available as it requires the transfer of the whole of the business, which would likely include the building. However, this will be very much fact dependant. However, I'm not sure why you would need a BICT in this case as it shouldn't be too difficult to transfer the property, even if there is a mortgage attached.

Where I've come into contact with BICTs is where landlords have large portfolios of geared properties which would each need to be refinanced at substantial cost and the BICT offers a temporary solution to allow the incorporation of a large enough property business without triggering CGT.