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The Solution

The Wincham Spanish Inheritance Tax (IHT) Protection Strategy
Our solution simplifies matters by assisting Clients to invest or purchase their Spanish property into a UK Limited Company (Wincham can provide this), of which the clients are both Directors and Shareholders, ensuring they remain in control of the asset whilst eradicating Spanish IHT. Contrary to popular belief there is no 7-10% Property Transfer Tax payable on the Investment Transaction. Our method enables clients to utilise Spanish legislation to conveniently own and maintain their holiday / retirement home within a corporate structure in the most Tax efficient way. Some Spanish paralegals recommend the use of an Off-Shore Company to own a Spanish property, this type of Company is subject to an additional 3% Tax burden each year unlike a UK Company which is not classed as Off-Shore and therefore does not have this additional 3% Tax to pay.

All Spanish property owners regardless of nationality and value of the asset should seriously consider restructuring their asset to protect it in the future.

Wincham Process

Wincham Investments Limited
The owner of the property forms a UK Limited Liability Company (which Wincham can supply), in which ownership of the property passes into the hands of their own UK Company. In this way when he or she passes away, the Company will be inherited by the Beneficiaries not the property, that means it will only be necessary to transfer some Company shares, which falls outside Spanish Inheritance tax.

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From the point of transfer the Company owns the asset.

But;

  • As the legal Company owner, you remain in full control of the Company - and therefore the asset.
  • You do not relinquish any control or decision making power regarding the property.

You stay in absolute control of the shares of that Company, and you have the final say in who owns those shares.

Therefore - Spanish Inheritance Tax does not become an issue, on your passing, the Company still remains the owner of the asset, it is solely the shares in the Company that will change hands when the time comes.

TECHNICAL

The technical issues surrounding the transfer of a property from a person, to a UK Company explained...

Proposition
To save Death duties and legal Fees in Spain and make the property easier to deal with by the Executors of the Clients Estate in the UK, whilst retaining the maximum value of the property for the beneficiaries.

Requirement
To establish a UK Registered Company owned by the Client for the purpose of protecting the clients property in Spain. The client’s share holding to be lodged with and noted in the clients Will in the UK. The property to be legally transferred from the Client to the Company.

Method
  • A UK Private Limited Company is to be formed by our UK Subsidiary, Wincham Accountants Limited.
  • Wincham Accountants Limited will provide the ongoing service of UK Registered Office and Company Secretary in the UK to include the annual filing fee at Companies House
  • A UK Notary will provide a translated copy of the Articles of Association and a Certificate of good standing, notarised and apostilled.
  • The Wincham Spanish Head & Legal Office will apply to the Spanish Tax office (Hacienda) for a CIF number for the Company, provide the transfer documents and attend the Spanish Notary to effect the transfer, and we will deal with the registration of the property in the Company name at the Spanish Land Registry.
  • Power of Attorney costs and Plusvalia Tax will be payable if applicable.
  • Wincham will deal with the Tax forms in Spain for the Company in the future at a small annual fee.


Advantages
  • Any dealings with the Company can be handled by a UK Solicitor and the Inheritance of Company shareholdings or loans can be achieved through a UK Will under UK Succession law. There is no requirement for Probate to be obtained in Spain and no Spanish Will necessary.
  • The Beneficiaries can become involved in the Company prior to the demise of the Owner. This enables easy continuity of the management of the Company and the management of the Property even if the Owner becomes ill or incapacitated.
  • Although in Spain it can take years to transfer ownership of the property to a surviving partner and the Taxes and death duties can be expensive this is a UK transaction and can be dealt with very quickly with minimum costs.
  • Once the Company is the owner of the Property then even if a shareholder dies there is no change of ownership in Spain. There is no reportable event in Spain and the change in shareholder needs no Will in Spain or Spanish Probate.
  • The Owner/Director of the Company may be entitled to claim expenses for certain costs including flights and car hire. The Company can also claim Tax relief against some overheads such as insurance, Community fees, utility bills and council Taxes. Any expenditure on the Property can be financed by loans from the Shareholder to the Company. A shareholder's loan account can be repaid to them by the Company at any time should funds permit. The Loan would be repaid prior to the calculation of any profit upon the sale of the Property by the Company.
  • Finance can be arranged with a lender jointly between the Owners and the Company to assist with the purchase. The repayments can be financed by shareholder loans that can be drawn down in a Tax efficient manner at a later date.
  • The Shareholding can be easily divided amongst family members or Beneficiaries and different levels of ownership can be established. Family members can be involved with either the ownership or the running of the Company.
  • As the ownership of the Company is handled in the UK there is no need to involve any Spanish Lawyers or Notaries in connection with any change of ownership whether by gift, sale or Inheritance.
  • The sale of the Property can be dealt with by way of a sale by the Company or a sale of the Company (with the Property still in it). If the Company is sold then this is entirely a UK transaction and this will limit the amount of Taxation and costs payable in Spain.
  • Upon a sale of the Company in the UK then a UK Lawyer can easily deal with the simple transfer of the Shares in the Company and any loan accounts.
  • In certain circumstances shareholdings in a trading company are exempt from UK Inheritance Tax.
  • The loan accounts would form part of your UK Estate but this can managed in a Tax efficient manner and with the correct estate planning Inheritance tax can be reduced.
  • Any increase in the value of the property will be classed as a profit for the Company and any losses incurred may be offset upon sale prior to Tax being paid.
  • Losses incurred by the Company would need to be taken into account when assessing the value of the shareholding for UK Inheritance Tax purposes.
  • There is no longer any benefit in kind Tax charged to UK Directors staying in a Foreign property owned by the Company.

Benefits

What are your benefits?
  • You are no longer liable for Spanish Succession Tax.
  • Your children, or secondary Beneficiaries are no longer liable for Spanish Succession Tax.
  • UK Companies don't pay Wealth Tax – currently only on properties over €700,000, but this threshold may well drop UK Companies do not pay 'notional Tax' on theoretical rent as non Resident property owners do.
  • You can use the share structure of your UK Company to plan what happens to your property when you die and manage your Capital Gains Tax using whatever UK allowances you have available.
  • Many of the costs of maintaining, running and visiting your property can be charged to your Company, building up a Directors loan account that can be used to Tax efficiently sell your property and minimise your CGT.
  • As part of our process we check your deeds are correct. To date 80% of the deeds we checked have been incorrect ( usually things like swimming pools added without appropriate approvals ). Having accurate deeds means any future sale is a lot smoother, quicker and actually happens. We provide Title Deed insurance as part of our service so we also want to know everything is correct.
  • Your UK Tax affairs are easier to plan and manage.
  • Tax deducted at source by a letting agent can be deducted against UK tax paid.
  • You no longer need a Spanish Lawyer or Accountant.

Fees & costs

This includes;
  • Formation of a UK Private Limited Company.
  • Management & administration fees
  • A UK Notary will provide a translated copy of the Articles of Association and a Certificate of good standing, notarised and apostiled.
  • Our Spanish Abogado will apply to the tax office for a CIF number for the Company, will provide the transfer documents and attend the Spanish Notary to effect the transfer, and will deal with the registration of the property in the company name.
  • Legal transfer and administration fees.

The fees for the provision of the above service start at just £5,300. This will fully include VAT (where applicable) in the UK, IVA (where applicable) in Spain, all Company Formation and document translation costs and all UK Notary and Legal Fees in the UK. The fees also include all Legal work in Spain and relates to the costs for a single property. Included in the fee for the first 12 months are our UK Registered Office and Company Secretarial facilities including Filing/Return Fee plus full support from Wincham's team of UK & Spanish Specialists to give you advice relating to your Company operation. Please also remember, unlike 'normal' property ownership all operational and setting up costs relating to the Company are reclaimable by you through the Directors Loan Account facility (effectively, you are simply 'loaning' the money to the Company and this can be repaid to you or your successors from either, say, rental proceeds or the sale of the property/company if funds were available.)


1 & 2 Year Finance Available: We could help you to finance this Tax planning structure over 1 or 2 years, click here to request more information

Annual Costs

Within the Wincham Fees for the first 12 months from a Clients instruction and selection of a UK Limited Company are the provision of the Wincham UK Registered Office and Company Secretarial services that include the Company annual return and filing fee at Companies House. This is chargeable every 12 months after the instruction date at £200 + VAT per annum.

The preparing, filing & submission of the Company's Annual UK Accounts is £400 + VAT for an Investment Company. This Company has investment assets and may also have income or expenditure. (The fee of £400 + VAT is on the basis that the Cash Books provided on our www.wincham.com website & Client On-Line Access are maintained by the owner, a higher charge may be incurred if limited information is supplied or Cash Books are not updated by the owner.) The UK Company accounts are normally due 12 months (annually) from when the UK Company was formed and the fee is not included in the Wincham fees on investment or purchase so is payable separately.

Any Company that operates in Spain requires a Fiscal Representative which is an approved Spanish Accountancy / Taxation firm dealing with the Spanish Tax Office (Hacienda). The Wincham Spanish Head Office supplies this service for the Spanish Tax year January 1st to December 31st. Within the Wincham investment or purchase fees this service is included for the UK Company until 31st December during the first year of instruction. It is then chargeable each year at a annual fee of £200 including VAT and includes the submission of a single Tax Declaration (Return) in Spain each year. Once the Spanish property is owned by a UK Company there is no further requirement for the Non Resident owners to submit personal non Resident Tax Returns in Spain each year as they do not own the property directly but own the UK Company that owns the Spanish property.