The technical issues surrounding the transfer of a property from a person, to a UK company

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, and to retain the maximum value of the property for the beneficiaries.

Requirement
To establish a UK Registered Company owned by the Client for the purpose of owning 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
1) A UK Private Limited Company is to be formed by our UK Subsidiary, Companies 4 U Limited (C4U).

2) C4U will provide the ongoing service of Registered Office and Company Secretary in the UK to include the annual filing fee at Companies House.

3) A UK Notary will provide a translated copy of the Articles of Association and a Certificate of good standing, notarised and apostil.

4) A Spanish Abogado will apply to the tax office for a CIF no for the Company, he will provide the transfer documents and attend the Spanish Notary to effect the transfer, and he will deal with the registration of the property in the company name.

5) Power of Attorney costs and Plus Valia Tax will be payable if applicable.

6) The Gestor will deal with the tax forms in Spain for the Company in the future at a small cost.

Advantages
1) The Company can be dealt with in the UK by a UK Lawyer, the Company Shares and Shareholders loan accounts can be dealt with in the Owners Will and Estate. There is no need to involve lawyers in Spain, or the Spanish Property.

2) 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, most certainly if the owner has become ill or incapacitated.

3) Should one of the owners die there is no need to deal with the person’s estate in Spain. It can take years to transfer  a partners ownership to the surviving partner, as well as the payment of death duties and taxes in Spain

4) The Company being the owner of the property means that no action is required in Spain and no Will is required in Spain for dealing with the property.

5) The Owner/Director of the Company may be entitled to claim expenses for things like flights and car hire .The company can also claim relief on overheads i.e.. Insurance ,Community fees, Electric, Water and Council Taxes. These can be financed by loans to the company by the shareholder, increasing the shareholders loan to the Company. This loan can be withdrawn later if the asset is sold and may be tax free.

6) 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 shareholders loans that may be available to draw in the future tax free.

7) Should the Owner wish to involve their family members or beneficiaries in the Company this is easily done, with the Owner keeping control of the Company and the property, it makes it easy to manage different levels of this ownership.

8) The property being owned by the Company means that there is no need to involve Lawyers in Spain when it is the time to deal with the Owners Estate or to pay the onerous complicated death duties in Spain.

It will also save the costs of the UK Lawyer in the time required to instruct the Spanish Lawyer to deal with the matters in Spain.

The cost of dealing with the transfer of property in Spain can sometimes be 10% of the value of the property and if a sale is required then a further 5% Agents fees would be charged.

In the UK the only thing that needs to happen is to transfer the Shares and Loans to the Beneficiaries.

It may be that the shares in a UK private company may not form part of the estate for death duties.

The loan accounts would form part of the Estate for death duties but these could be transferred to the beneficiaries over a number of years as the tax system allows.

UK Lawyers fees and Inheritance tax can take as much as 50% of the value of the property. This, added to the costs in Spain make it sensible to protect the property in a UK Company

9) The increase in value of the property is to the advantage of the Company and not directly for the beneficiary therefore a saving on death duties may be made.

10) In the last UK Budget the Chancellor removed the benefit in kind Tax on Owners or Directors staying in their company owned property this takes effect from April 2008 

Once they have this structure in place, the property ownership is transferred to a UK company. If they want to sell it they can, rental income doesn’t change, except visits to Spain, hire cars and all kinds of bills become tax deductible.