First of all, let us consider the loan made by Jack and Jill to the Company.

In this example each of them are treated as owning half of the loan.

The position, year by year is shown in Table 1 (Loan) and Table 2 (Shares) (these should be a link or links if they can’t be shown within the main text)

Table 1 shows that, in 2020, when Jack dies, the total loan to Jack and Jill Limited has risen (because of the annual costs subsidised by Jack and Jill) to £230,900, but they have by then passed on the benefit of £78,000 worth of the loan to their children free of any inheritance tax. Table 2 shows that, in 2020, when Jack dies, his 50 shares are worth on the basis of the assumptions made half of £11,315, namely, £5,657.50. He has gifted 49 of them to his children, worth £5,544.35. Total passed to children for inheritance tax is £5,544.35 + £38,225 (half of £76,450) = £43,769.35, well under the exempt limit of £300,000. At this point, the children own shares are worth £135,785 + £5,544.35 + £38,225 = £179,554.35 on which no tax is payable either in Spain or the UK)

 When Jill dies, Table 2 shows on the assumptions made that her shares are now worth £13,303.35 (£26,085/100 x 51). Table 1 shows that the total loan to the Company has risen to £250,900, of which £146,225 has already been passed on to her children with the loan still owing to Jill being £104,675. Jill is therefore gifting £13,033.35 (her shares) along with the loan of £104,675, making a total of £117,978.35 being gifted by Jill for inheritance tax purposes, again well under her exempt limit, which would, based on the proposed new legislation, be £556,117.50 (this is £300,000 to which Jill is entitled in her own right plus £256,117.50 unused of Jacks entitlement).

 On these figures, Jill would still have over £400,000 available to cover the value of any other assets she may have to pass to her children.

Ignoring any other assets, the children will have inherited from Jack and Jill £250,900 of loans and £339,100 worth of shares, a total of £590,000 upon which no inheritance tax is payable, and, in relation to their overall estates, leaving £438,252.30 available for other assets to be passed on without incurring inheritance tax liability under the recently announced proposals. This assumes that Jack and Jill do not leave any other gifts of their estate. The position described would be the same if Jill dies first leaving her shares and loan as described in relation to Jack.

Links

TABLE 1.

This table demonstrates how the initial loan to Jack and Jill Limited would increase where net running costs of £2,000 per annum are loaned to the Company by Jack and Jill, but they gift/assign the permitted maximum for exempt annual gifts to their children as set out in the assumptions on which this example is calculated.

 * This would be the position after Jack’s death where his loan of £76,450 has been   gifted by Will to his wife (half) and children (half)

TABLE 2

This table shows how the share values increase based on the assumptions set out in the example (Jack and Jill each owning 50 £1 voting shares, and their children subscribing for 6,000 £1 non-voting shares in 2008

**        What has happened to Years 2009 and 2010

***      What Has happened to Years 2015 and 2016

++        What has happened to Years 2022 and 2023

+++     What has happened to Years 2027 and 2028

Not sure where the Conclusion is supposed to appear

Conclusion

Restructuring ownership of your property now is a legal, intelligent and very simple process to save a small fortune in future taxes for your heirs.

The Wincham Investment property strategy takes care of everything for you.

We use qualified Lawyers, company formation agents, accountants and business consultants to restructure your property ownership.

You will NEVER lose control of the property itself, and can rent or sell it as you wish

 Click here to receive an information pack with more details

 Spanish lawyer’s view

Introduction by Maria L. de Castro

Maria is a Legal Advisor in Spain

In considering (Note: we are not ‘discussing’) the benefits of transferring a property in Spain to a United Kingdom Limited Company, let us consider the position using an example;

I. ONE SPOUSE TO THE OTHER:

Let us look at the costs and time  involved in a probate procedure in Spain in a typical case where one spouse leaves jointly owned real estate property to their marriage partner, and to their two children (25  and 30 years old) as an alternative:

Illustration

 Jack dies in 2007.

• Jack has a property in Spain valued at 300.000 euros.
• His will names his wife (Jill) as heir, and two children as alternative heirs.

Jill, (Jack’s wife) survives Jack.

• At the time of Jack’s passing the property belongs 50% to each of them.
• In Spanish law the 50% owned by Jack falls into probate.
• Value of the inherited portion (i.e. Jack’s half share) therefore is 150.000 euros

Procedure and timeframe for the registration of the house in Jill’s name:

1. Probate procedure (made by a Spanish Lawyer)
2. Obtaining Power of attorney for probate procedure = (15 days)
3. Obtaining Certificate of the Registry of Last Wills = (30 days minimum)
4. Petition of Will to Notary  = (15 days)
5. Declaration of goods for payment of ISD ( Inheritance tax)  = (10 days)
6. Payment of tax = (15 days) Included in legal fee.
7. Notarising  probate deed =  ( 10 days)
8. Registration of inherited portion in Land Registry = (30  days)

Dependent upon the time of year, court workload, notary schedules and delay possibilities, any or all of these timescales could be doubled or more.

OVERALL TIMESCALE:  4 to 6 months.  During that time, if a bank  account is also inherited,  it is frozen.

Expenses ( approximate):

1.Legal fees for the  probating process are as an average of: 5000 €.

2. Tax to be paid in that case ( assuming the owners are andalusian residents):

The Alternative to an Initial 24,127.60€ Tax Bill

With the property in Spain owned by a UK Limited company:

II.LATER:

When Jill dies:
Their children (the two sons 30 y/o, 25 y/o) will have to probate the property again:

Every child: Same fees, same timing, same tax by each of them.

(Note: This should be detailed with the figures to make it clear – does each child pay 24,127.60 euros – what happens if the property is more valuable?)

The Alternative to a SECOND Inheritance Tax Bill 
  
If the property in Spain is owned  by a company in the UK, there will be the correspondent transmission of shares and no liabilities under succession law in Spain. No fees, no legal costs

"This is a form of double taxation and it's simply unfair"
Doc Hastings