Spanish property

[dasmith]

Can someone please give some consideration to my Spanish property problem?

A property is theoretically owned by 5 people, but the property is in the sole name of one of them. He has a Spanish will stating it gets split between 5 people equally but this will trigger some enormous Spanish tax bills as apparently it is the beneficiaries who are taxed in Spain, not the death estate.

The property is owned by a UK individual and the plan is to transfer it to a UK Ltd company (Newco). This avoids any Spanish tax as the beneficial owner is still the same person.
After this Mr A will give away shares so the other owners all have equal ownership of the company and thus the property.

Question 1: Will the transfer of the property from Mr A to Newco trigger UK CGT? I have said it would be a deemed disposal and trigger the tax.

Question 2: If Q1 is Yes, Cost £24k July 1995, now worth £100k. What is the CGT?

Would it be assumed the gift of shares would need 7 years of survival to drop off IHT calcs?


The Spanish "Accountants" have a scheme which does the above for a princely sum but have gone remarkably quiet on the UK tax side of things, instead concentrating on highlighting potentially scary amounts of Spanish tax if nothing is done.
Their plan though is to use redeemable preference shares issued to the other "owners", but I don't see the benefit.

[pawncob]

A's disposal will trigger a CGT point and his gain will be £76k (less annual allowance?) at 18%.

However, surely his gifts to others (of the shares) will also be a disposal, albeit one with no CGT consequences (assuming no increase in value) and will also be gifts for IHT purposes. This will be subject to (reducing rates) IHT for 7 years.
As the beneficial ownership will also change, presumably it will trigger a Spanish CGT point.

[jvenegas16]

The beneficiaries are taxed under the Spanish IHT rules. That means the estate is splitted in the proportion of their shares of the estate. Depending on their relationship with the deceased each one will have the equivalent to a personal allowance, which varies from region to region if they have approved their own reductions, otherwise, it will be the general ones. Therefore, it is important to know where the property is located.

The rate goes from 7.6% to 34% with different brackets; once splitted if their share is not too high they may be paying a rate of, let's say, 14%.

You will pay CGT in Spain on the sale of the property (18%, the same as in the UK). Enhancement expenditure will need to be taken into account.

On the sale of the property the purchaser will pay transfer tax at 7%.

'pawncob' has already answered your points about the UK tax.

I hope that helps.

Regards,

Juan Carlos
juan@fiscalaccounts.eu