One tax story for cross-border families and business owners

Ezio is Italian.

He runs a successful business between Milan, Puglia and London and is now looking seriously at property in both countries.

At dinners, in WhatsApp chats and in meetings with banks, he keeps hearing the same line:

“Put the property in a company. It’s more tax efficient.”

He is about to make three decisions:

1. buy the UK premises his UK business uses every day;
2. buy a London flat to rent out;
3. buy a family holiday home in Calabria.

Using one UK company for all three looks elegant and professional.

In reality, only one of these choices usually fits well in a company. The other two can quietly create tax and compliance problems — especially for someone like Ezio, who lives in one country, invests in another, and might move again.

Here is how his story breaks down.

1. The trading premises – where a company can make sense

Ezio’s UK company has outgrown its serviced office. The landlord offers to sell the building it already occupies.

Letting the UK company buy those trading premises is often a sensible, defensible option:

• The property is a genuine business asset: office, warehouse, clinic, restaurant or similar used in day-to-day trading.
• Any gain on a future sale is taxed in the company under the corporation tax regime.
• There is no ATED issue because ATED targets high-value UK residential properties held in corporate “wrappers”, not commercial trading premises. (See below and check https://www.gov.uk/guidance/annual-tax-on-enveloped-dwellings-the-basics) 
• Banks usually understand and support this structure:
  • trading company borrower,
  • income linked directly to the property,
  • clear security.

Points Ezio must still manage carefully:

• Holding the building inside the main operating company can complicate a future sale of that business (a buyer may not want the property).
• Using a separate UK property company within the same group can ring-fence risk while remaining commercially and fiscally coherent.
• Any private use by Ezio or his family has to be controlled and documented to avoid benefit-in-kind or deemed income issues.

For the trading premises, a company structure can align with reality and with the rules.

2. The London buy-to-let flat – where “company = savings” often fails

Next, Ezio finds a London residential flat to let to third-party tenants.

The advice repeats: “Use a UK company. You’ll pay corporation tax instead of high personal tax.”

On the surface this seems attractive:

• Rental profits in a company are taxed at corporation tax rates, which may be lower than Ezio’s top marginal rate.
• The company can usually deduct qualifying finance costs.
• Retained profits can help fund further acquisitions.

But Ezio’s real objectives are:

• to receive spendable cash, and
• to keep the structure compliant and efficient in both the UK and his country of residence.

This is where problems appear.

(a) Two layers of tax

The company is a separate person.

To use the rent personally, Ezio must extract funds as:

• salary (with payroll and potential social security), or
• dividends (taxable where he is resident, with limited credit for underlying tax).

The result is often:

1. tax at company level on rental profits;
2. further tax on Ezio when he takes money out.

Once the residence-country tax is added, the perceived “saving” from the lower corporation tax rate may disappear, especially for a single flat.

(b) Higher purchase taxes for companies

Buying UK residential property through a company can mean:

• less access to reliefs available to individual buyers;
• higher effective Stamp Duty Land Tax (SDLT) where corporate and non-resident rules apply;
• treatment as an “additional” or non-individual buyer even when this is a first property in the UK.

So Ezio may pay more tax upfront just to enter the company structure.

(c) ATED exposure

If:

• the flat is worth more than the relevant ATED threshold, and
• it is held by a company, and
• it is not clearly and consistently used for a qualifying commercial rental or development business,

then an annual ATED charge can arise.

A single high-value flat in a company, particularly if used or reserved for owners, can become an unnecessary ongoing cost.

(d) Home-country visibility

If Ezio is, or becomes, tax resident in Italy or another EU country:

• the shares in the UK company,
• any dividends received, and
• in some cases the underlying property position

fall within local reporting and potential anti-avoidance rules.

What started as a simple investment can become a structure with:

• higher entry costs,
• complex cross-border compliance, and
• little or no net tax advantage.

For one or two London flats, a company is not automatically the right answer. It can work for a genuine, scalable rental business, but it must be modelled properly.

3. The Calabria holiday home – where the company really backfires

Lastly, Ezio and his family decide they want a holiday villa in Calabria.

A contact suggests:

“Let your UK company buy it. It looks professional and might be safer.”

This is where the structure is most likely to cause trouble.

Key issues:

1. No commercial purpose

A UK company holding a purely private holiday home:

• is not running a real rental business,
• is providing a benefit to its shareholder/director.

Tax authorities may treat this as:

• a taxable benefit in kind, or
• a disguised distribution.

Ignoring that reality does not remove the problem; it increases it.

1. Multiple tax systems, limited benefit

With a UK company owning an Italian property:

• Italy may tax income and gains linked to the property and look closely at non-resident corporate owners;
• the UK may still have an interest in the company’s worldwide position;
• Ezio’s country of residence may tax him on value, distributions or deemed income.

The villa becomes exposed to several overlapping regimes without a clear economic gain.

1. No automatic protection

Holding the villa in a company does not, by itself:

• remove it from succession rules,
• guarantee asset protection,
• simplify matrimonial or inheritance outcomes.

Without proper legal and estate planning, the “wrapper” is just an extra layer.

1. Financing and perception

Banks and local advisers can be sceptical of a foreign trading or consultancy company owning a private villa with no genuine business rationale. That scepticism is rarely helpful.

For the Calabria holiday home, using a UK company is generally the wrong tool.

Checklist  

Before using a company to buy property, test three points:

1. Is it a genuine business asset?
   Trading premises and professionally run rental portfolios may justify a company.
   A single family flat or holiday villa usually does not.
2. Do you need the cash personally?
   If yes, factor in extraction taxes. Corporation tax alone is not the full story.
3. Does it work in every relevant jurisdiction?
   The structure must make sense under UK rules and the rules of your country of residence and the property location. If it only works on one side of the border, it doesn’t work.

How Vectigalis Tax supports people like Ezio

If you are:

• an Italian or European investor considering a UK property company;
• a UK resident holding or planning property in Italy or elsewhere via a company; or
• already in a structure that does not feel comfortable,

you can request a confidential review.

Contact Vectigalis Tax

Angelo Chirulli – International Tax & Cross-Border Structuring

Mail: angelo@vectigalistax.co.uk

Include a brief outline of:

• where you are tax resident,
• what property and companies you have or are considerin
• what you are trying to achieve.

Important caveat / disclaimer

This article is for general information purposes only. It reflects UK tax rules (including corporation tax, SDLT and ATED) and typical cross-border considerations as at the date of publication and does not constitute legal, tax, accounting or investment advice, nor does it take into account your individual circumstances.

No action should be taken, refrained from, or any arrangement entered into or unwound solely on the basis of this article. Specific professional advice should be obtained on your facts before implementing or altering any structure or transaction. Vectigalis Tax accept no responsibility for any loss arising from reliance on this content without such tailored advice.