Finance Brief Alerter 02.07.11
In this July edition of the Finance Brief we revisit the new tax regime announced in the recent Budget and look in particular at the implications for bankers when structuring new loans secured by property located in the UK but held by offshore corporate vehicles. Continuing on the property theme, we have a short analysis of the LMA's new real estate finance facility agreement. Our third article is a full briefing on the issues and legislation to take into account when lending to individuals, and, finally, we provide a guide to registering a yacht in Cyprus.
As ever, please do not hesitate to contact the authors of each article directly if you would like any further advice on the topics covered.
Implications for bankers of the new tax regime on loans secured by offshore held UK dwellings
In our recent Finance Brief Alerter we referred to the new tax regime that the Chancellor announced, which could apply to high value UK dwellings (over £2 million). In essence the proposed changes amount to a three-pronged attack on the purchase and ownership of UK dwellings through corporate vehicles whether offshore or onshore. The first (already in force) is a 15% rate of Stamp Duty Land Tax on the purchase price of the dwelling. The second is a proposed annual charge of between approximately 0.3% and 0.75% per annum depending on the value of the dwelling. The third is the extension of the UK capital gains tax regime to include gains on the disposal of UK dwellings by non-resident non-natural persons and gains on the disposal of shares in corporate vehicles which derive the majority of their value from dwellings worth over £2 million. The rate of applicable CGT has yet to be announced. The charges are intended to take effect in April 2013 following consultation and the publication of draft legislation in the autumn.
The LMA Real Estate Finance Facility Agreement
The Loan Market Association (the "LMA") launched its real estate finance facility agreement in April. We think that the agreement will (and should) be welcomed. As the LMA acknowledges, however, it is no easy task to produce a "one size fits all" agreement, and the aim is more modest. Indeed the LMA points out that it will be impossible to use the agreement without amendments or additions. Matters such as updated valuations and covenant-cure mechanics will have to be negotiated on a case by case basis. Additional property-specific representations and undertakings may be needed if the document is used for a single-property facility.
Lending to individuals
When lending to an individual borrower, or seeking to obtain a personal guarantee or security from an individual, a lender will need to consider a number of matters and potential traps. This briefing paper sets out some of the relevant legislation, issues and other factors that a lender should consider in financing transactions involving individuals.
Yacht Finance – Spotlight on Cyprus
This briefing paper builds on our firm's Yacht Financing briefing paper and focuses, in particular, on Cyprus as a jurisdiction of registration. Whilst the Cypriot flag has long been a popular "flag of convenience", recent VAT reform is likely to increase this popularity among pleasure boat owners.
We have set out below the basic aspects of registering a yacht in Cyprus. Please do not hesitate to contact us should you have any particular queries.
The next edition of the Finance Brief will be on 1 October 2012, in which we will be looking at the remedies which are available and the procedures to follow when enforcing against a personal guarantor as well as issues around "COMI" and other further topical legal issues for private bankers.
We are very keen to hear your feedback on The Finance Brief – please do get in touch.