Closing a BVI company that owns UK property usually requires the property to be transferred, distributed or sold before the company can be dissolved. The liquidation should be planned around the ownership transfer, tax position, lender and registration requirements, and the documents needed to complete the distribution. This article sets out the practical sequence.

Why Extract UK Property from a BVI Company?

There are several reasons why an investor might want to extract UK property from a BVI company:

• Changes in tax regulations: Tax laws can evolve over time, reducing the initial tax benefits of holding UK property through a BVI company.

• Shifting investment goals: An investor’s investment strategy might change, making direct ownership of the UK property more suitable.

• Selling the property: For a sale, direct ownership can simplify the process.

Voluntary Liquidation: The Solution

Voluntary liquidation is a process available to any solvent BVI company. In the context of BVI companies owning UK property, voluntary liquidation allows for the transfer of the property ownership from the BVI company to the shareholders in a tax efficient way. This eliminates the BVI company structure and streamlines future property management.

Tax Benefits

Distributions from a liquidation are usually treated as capital rather than income and therefore subject to tax at capital gains rates.

The Process of Extracting the Property

Here’s a simplified breakdown of the process for extracting UK property through voluntary liquidation of a BVI company:

1. Preparation: Consult with a qualified professional to develop a liquidation plan outlining the process, costs, and timeline.

2. Directors Resolutions: The Directors of the company make a declaration of solvency, prepare a liquidation plan, and pass a resolution proposing to liquidate the company.

3. Shareholder Resolution: The shareholders pass a written resolution approving the liquidation plan and appointing a voluntary liquidator.

4. Liquidator Appointment: The liquidator is appointed and the company is formally in liquidation.

5. Property Transfer: The property is usually distributed in specie to the shareholders. This means that the property ownership is transferred directly to the shareholders in proportion to their shareholding.

6. Company Dissolution: Once the property and any other assets have been distributed to the shareholders, the BVI company is formally dissolved and removed from the BVI register.

Practical considerations:

The company will also need to instruct a UK property lawyer to assist with registering the transfer of the property with HM Land Registry.

To recognise the transfer, HM Land Registry will also require a legal opinion from a BVI legal practitioner. These can usually be obtained for around US$1,000 and this should be coordinated with the relevant BVI and UK advisers.

Conclusion

Voluntary liquidation offers a viable solution for BVI companies wanting to extract UK property in a tax-efficient manner.