UK company formation to avoid IHT?
 

There have been many threads on IHT, but I have been made aware of a "new" system which involves starting a UK company which owns all Spanish assets with the owners as shareholders.

Apparantly when the assets are eventually sold or there are "profits" they go into the company and the directors take directors loans.

Thus, IHT is avoided in Spain

Any knowledge or thoughts?

Re: UK company formation to avoid IHT?
 

Yes its a distinct possibility. There are downsides it will cost at least £5000 to set up plus taxes in Spain to add on. There will be ongoing company costs in the UK about £500 pa and a bit of hassle.

However there are also dangers, when we bought the plot 5yrs ago we were going to put that into our UK private limited company but our London Solicitor said don't do that since you will be taxed on benefit in kind on any time you spend in the villa and since we intend to spend >183 days a year there that could be expensive. We also looked at a Spanish company or a Spanish sub of our UK plc but decided against and bought in the family names.

Since then, last April I think, HMRC have dropped the benefit in kind tax but Spain have imposed one so those who bought with a Spanish SL at about €3000 plus annual costs have now begun to unravel at even higher costs. Who is to say Gordon will not reimpose the tax for who make extensive personal use of the company asset. Also if you wanted to sell the house you sell the company so there is no CGT to pay in Spain and all your running costs can be set against UK company tax but I think caution is the word I would use.

Re: UK company formation to avoid IHT?
 

Out of interest, Can I ask why it would cost £5000 to set up a UK company? And what taxes in Spain to be added?

Tim

Re: UK company formation to avoid IHT?
 

Cause thats what the company who are doing this charge, we only paid £100 for ours. The property has to be disposed of to the UK plc so you would have to pay the cost of the Spanish taxes on disposal.

Re: UK company formation to avoid IHT?
 

Thanks, I now see where you are coming from.
Tim

Re: UK company formation to avoid IHT?
 

If it might interest you have a look at (SNIP) they are based in Congleton and I am going to talk to them but I am not yet convinced.

Re: UK company formation to avoid IHT?
 

1. Get professional advice.

2. Make sure that they are prepared to bet their public liability on it.

(That means if their advice was wrong, you have the right to sue them.)