The Inheritance Tax (IHT) implications of owning a second property should never be forgotten, especially when that property is abroad, when the IHT regime of the other country will also be a consideration. The harshness of the IHT regimes in many countries makes ownership of a property through the medium of a UK resident company sensible in many cases. However, it should be remembered that some countries impose additional tax liabilities when properties are held by companies. Also, under UK tax law, where accommodation is provided, the taxation of benefits in kind provided by UK companies to their directors and employees has always been a potential issue.

Fortunately, the Finance Act 2008 contains legislation which is designed to ensure that UK taxpayers who own a foreign property through the medium of a company are not disadvantaged for tax purposes as a result, by removing a benefit in kind charge where certain criteria are met.

These are:

  • that the property must be owned by a company that is owned by individuals, not another company;
  • that the property is the company’s only or main asset;
  • that the only activities of the company are incidental to the ownership of the property; and
  • that the cost of ownership of the property is not funded directly or indirectly by a connected company.