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Ownership options

Normally, when considering the purchase of property overseas, most people will assume that individuals themselves will purchase any property.  Usually, considerations such as “Tax Efficiency” or “Future Tax Liability” are never considered.  The fact is: many purchases of overseas property may be more attractive and made more efficient if the prospective purchaser were to review the various purchasing options in greater depth, initially with a reputable independent overseas property consultant and then if required, with an accountant before the actual purchase is made.

One of the main considerations in the purchase of overseas property should be: “Why is the purchase being made?” Once the reason for purchase is identified, it is very important that it is not forgotten during the actual purchasing process.

In our view there are three main ways in which overseas property may be owned:

  • By an individual or a group of individuals.
  • By a company.
  • By a UK Pension Fund

There are several main reasons why overseas property is purchased:

  • Pure investment.
  • Retirement. (Immediate or future)
  • Owner’s holidays.
  • Letting.
  • Alternative income stream in retirement.
  • To enhance remuneration in retirement.
  • Company’s employee benefits tool.
  • Corporate asset investment.
  • New business opportunity.
  • Pooled investment.

Whichever way a client decides to own property overseas, it is important for us to remember, that it’s going to be the clients property.  So, we find out what your requirements are and what it is you want.

Each potential property purchaser is interviewed at length to identify what their requirements are.  Only then will we put together a portfolio of property for viewing which both suits the client’s requirements and their budget.

If a purchaser decides to let their property; advice on the rental income is invaluable.  Our relationship with our clients does not end with the sale of a property. Our advice and help is free to purchasing clients, as the owner selling any particular property pays our remuneration.

We do not provide sales tactics or false incentives to attract clients.  Therefore you will not be induced by free or subsidised flights and free accommodation with free food and drink from our company. 

Why should you take advice from our company?

The importance of appropriate advice from a professional overseas property consultancy cannot be over stated.  Our company does not charge clients for advice and help in the purchase of their property.  We prefer instead, to charge the vendor or developer.  So, there is no good reason, not to ask us for advice if you are serious about purchasing property overseas. 

 

Ownership by the Individual.

This option is simple.  All you need is the money to support your choice or the personal situation to attract mortgage facilities.  Once we have identified with you what your requirements are we will put together a specially designed portfolio of suitable property and invite you to view.

The first step is for us to get together.  Whether that is face to face or a telephone meeting it is very important for us to ask you a number of pertinent questions so that we are fully briefed about what you require. 

You will be then be invited to inspect the portfolio, which has been identified as meeting your brief.  We will accompany you exclusively and help you to arrange the purchase of any property.

It is worth repeating that there is no charge to you for this service, the person or the developer who owns the property you eventually choose to purchase will remunerate our company in due course.  This form of remuneration is very common outside of the United Kingdom.

Our company’s help for you does not end with the purchase of your property.  After your purchase there will be many ways in which we will be able to give you practical help.  Again there will be no charge to you for this service; we usually get the benefit of recommendations to our client’s friends and relations for further property purchases because of the helpful way in which we conduct our business.

 

Ownership by a Group of Individuals.

Increasing in popularity for overseas property purchases is co-ownership.  The reason for this option usually falls into one of two categories:

  • Those with limited funds, pooling their funds to buy a much higher value property than they would otherwise be able to consider.
  • Those with funds sufficient for one property but wishing to create a portfolio of letting property with friends or colleagues.

For those considering buying together with friends or relatives we have one word of advice: Beware whilst it will be a good idea for some, it will never be worth putting your relationship in jeopardy, by not taking advice.  If potential purchasers are considering co-ownership, then we would encourage them to contact us for advice before making a purchase, we have considerable expertise in this area, and we may be able to make relevant suggestions that would protect all involved.

Fractional ownership as it is called is getting very popular for families.  In effect your ownership is governed by the amount of funds you offer to the pool.  The fraction of ownership is in the number of shares in the property.

If you are considering this option, you need to elect a spokesperson from your group to administer the process.  We have considerable expertise in this area and will be happy to help your spokesperson and conduct the process with them.

For friends and relations, the setting up of a company to purchase overseas property is a much safer way of investing in property together, as owning shares within a company will remove the emotional attachment from the purchase.  Letting property will also be made easier if there are several shareholders contributing to the marketing strategy for letting. 


Ownership by a Company

This option is usually considered by one of two groups:

  • A group of people already in business together.
  • A group of people wishing to form a company to hold property.

Regarding the first group, usually the accountant will recommend the formation of a new company rather than the main trading company holding property as part of its assets. The taxation reasons for this will be discussed with the accountant for each individual company.

Regarding the second group, the formation of a company is usually straightforward and is best conducted by the accountant.  There are several areas connected with the setting up of a new company that need to be addressed and we have a considerable expertise in these areas which we will be happy to offer free of charge to any potential clients.

Prior to taking either dividends or profits from their existing businesses to buy overseas property for themselves, company directors or partners should first consider the potential benefits of a separate limited company making the purchase rather than them, as individuals.  Any funds introduced to the new limited company can be introduced under a director’s loan account and therefore be returned at a later date.

Existing co-directors, partners, individuals, friends and relations may all set up a limited company.  The appropriate amount of shares will be allocated to each individual according to the amount of funds invested.  Providing the company manages the property correctly it will usually obtain Inland Revenue approval and appropriate tax reliefs accordingly.

There can be significant tax advantages in using a company to buy and manage overseas property.  Shareholders may use the property themselves, saving on their personal taxation liabilities and their personal expenditure.  Property portfolios may also be used to provide income in retirement for directors or partners that need not die with them, as it may be willed to others and therefore retained within their families.

 

Advantages of owning property through a company

  • Surplus cash can be invested with the potential to produce both substantial capital growth and an ongoing revenue stream.
  • Banks etc will typically lend as much as 70% of the purchase price if needed.
  • Interest rates in many other European countries are currently lower than those in the UK.
  • As you personally need not withdraw funds from the company higher rate income tax and employers national insurance contributions can be avoided.
  • Interest on borrowings to fund the purchase is tax deductible.
  • Rental profits are taxed at the company's marginal rate of tax, which is typically lower than personal income tax rates.
  • The property can be made available to management and/or key people in a cost and tax efficient manner, typically saving up to 50% of the cost of similar holiday accommodation purchased from a tour operator etc.
  • The property can be provided to other staff either on a week-by-week basis or perhaps as part of a promotion e.g. Best Sales Agent of the Year etc. Either way this represents a low cost (or free) holiday to the staff member.  Never before has there been a better staff retention tool than a property in the sun.
  • The profit on the eventual sale of the property will be taxed at the company's marginal rate of tax, which is typically lower than personal income tax rates.

 

Ownership via a UK Revenue Approved Pension Fund

Investing in five star Luxurious “Revenue Approved” overseas property has never been easier and now you can fund your purchase with your pension using a SIPP (Self Invested Personal Pension). This not only offers incredible tax advantages but also puts you in control of how your pension is invested for the future.

The process is much easier than you may think! We have partnered with some of the UK’s leading pension and investment experts to give you the help and information you need to guide you through your options. They will access your current pension funds and then deal with the transferring of any “frozen” pensions from previous employment, businesses and/or funds from other personal pensions. All you have to do is select the property you want in your pension fund.

You can also “club” together with other family members or other investors to jointly purchase one, or several, of our properties.

Contributions into a SIPP attract tax relief at an individual’s highest rate of tax. A SIPP is also able to borrow money against its assets. This action is called gearing and can enhance future growth considerably.

As with any other investment the property purchased by your pension will benefit from future capital and rental income growth. You may if you wish participate in the hotel managed rental scheme. This is the easy way of putting your property in the experienced and professional hands of our five star hotel partner and world-leading resort operator.

Consider your options carefully, if your pension funds have reduced in recent years, this may be due to the investment performance from your pension provider. If this is the case why are you paying them an annual fee to lose your money?

Maroubra International Limited does not give financial advice and is not authorised by the Financial Services Authority to do so.

What should you do now?

If you have any interest in purchasing property overseas, either as an individual, via a pension or through a company telephone 01285 – 810863 or 07798 - 682198.  A personal appointment can be made for you to speak to Barry Wicks.  Barry will be able to help you to identify which route would be more advantages for you.