Does anyone own a property purchased with a UK limited company ?  Good and bad points using this method etc

Hi,

Please read our story as published in the Mail On Sunday by Tony Hetherington.  You can google this by typing Tony Hetherington spanish 'definitely maybe guarantee.

We purchased through Atlas International - worst mistake of our lives! We are having to take legal action to try and recover our 51,000 Euro's.

Johnny, I think you are misunderstanding the point. I think this is related to purchasing a property using a UK company for tax reasons. Or am I wrong?

fultond, yes that is correct

Avoid gpg .

What or who is gpg ? I have a reputable lawyer this end and the same in the uk to purchase the company. However I m worried there may be unknown  Spanish taxes. The reason I am purchasing this way is because the vendor already has the property in a UK company. There must be someone out there that owns property this way....

Hello Gwm,

I own a property in Spain via a UK Limited Company structure and will list some of the advantages that I have.

1. No personal non Resident Tax Declarations in Spain every December for owning the property in my own name but a Company Tax Declaration every January that is submitted to the Spanish Tax Authorities at Zero due to the European Treaties that Spain and the UK have between them.

2. I have removed Spanish Inheritance Taxes for my Beneficiaries as they will inherit the UK Company shares and not the property under Spanish Inheritance Tax Laws of the Central Tax office in Madrid as my Beneficiaries are not Resident of Spain so are not Taxed by the Regional Laws.

3. When I sell the UK Company there will be no 7% Purchase Tax in Spain to the buyer and no 3% Withholding Tax to my Company. If a buyer does not wish to purchase the Company then they can purchase the property out of the Company in the normal way. If the buyer purchases my UK Company then there is only a 0.5% UK Stamp Duty in the UK on the purchase value of UK shares.

4. Shares in a UK Private Limited Trading Company are exempt from IHT in the UK and Capital Gains Tax in the UK when you sell a Trading Company can be at only 10%.

Property On Finca Parcs - You are always waffling on about the Wincham model which is flawed from both a UK and Spanish tax perspective. Am I right in saying you are an agent for Wincham?

Anyone reading this thread AVOID Winham at all costs.

Also in the UK how is the company considered a trading company - what is its activity?

Gwm - I believe under Spain's anti-avoidance legislation you could well be assessed to transfer tax based on the value of the property because a change of ownership has taken place even though that change of ownership will take place by stock transfer in the UK. Also there are many other taxes that need to be considered. I personally would not acquire a Spanish property in this manner.

I would suggest reading up on Spain's anti-avoidance legislation.

Dear Faro,

I have answered directly to the Post by gwm on the 16th July and also the Post on the 13th August as it looks like gwm may be purchasing a Spanish property already in a UK Limited Company structure and he is looking for comments and reference to this type of ownership.

It is important to understand that owning a property in Spain in a UK Limited Company is not a UK or Spanish Law but a European Treaty that both Spain and the UK are bound by and they cannot make local laws that overrule EU Treaties. This is proven by a CIF number that a UK Company has to have to operate in Spain just like an individual requires an NIE number and also the annual zero Tax Declaration which is accepted by the Tax Office of Spain unlike an offshore Company which attracts the annual 3% for not being within the EU. The UK Company is classed as a non Resident Company of Spain so it has no Tax to pay for the ownership of the property in Spain.

If a UK Limited Company owns a property in Spain and it can demonstrate genuine trading activity then it should be classed as a trading Company in the UK. For example, if the UK Company managed other UK properties and helps collect rent for the Landlords of these UK properties then it can bill those Landlords for management fees, and also the marketing of them if it has helped locate the Tenants, here is genuine trade.

If the owners of the Company which owns the property in Spain are high Tax payers themselves then they can bill some of their income via the UK Company and only pay 20% Company Tax in the UK, appose to a higher personal Tax band themselves, this is also a way of reducing their personal income amount meaning it may reduce their personal Tax band, here is genuine trade.

It would be inappropriate for me to name drop on this Forum but if you are referring to Wincham Consultants then you (Faro) probably have noticed on their website that they were nominated for an award at 'A Place in The Sun Live' at Earls Court in London this year for their services.

You're obviously aware the Wincham model has been criticised by many tax advisors in both UK an Spain. Wincham always says this is becuase Spanish lawyers or tax advisors do not understand how these EU directives are applied.

At best the scheme relies on a lot of ducking an diving and hoping the various tax authorities don't spot what is going on and ask any awkward questions. eg how many poeple could demonstrate their second home is part of a genuine trade and now you are suggesting re-routing personal income also?

When you speak of EU treaties/directives do you mean the DTA between Spain and UK or some other EU treaty/directive Possibly you would tell us exactly what EU treaty/directive you are referring to and also the relevant article or section.

Hello Faro,

The European Treaty is there to allow international trade between Countries within the European Community, the treaty allows a Company from a European County to operate within any other EU Country and the Company can decide in which jurisdiction it would like to pay it's Tax. This can be the Country in which it is operating (Spain in this case) or the Country in which it is registered (the UK in this case)

I will demonstrate below ::

A UK Limited Company has to have a CIF number to operate in Spain which is supplied by the Tax office in Spain.

The UK Company will request a Certificate of Residence from the Tax office (HMRC) in the UK demonstrating it is a Tax Resident Company of the UK.

Once a UK Company owns a property in Spain the Company has a legal obligation to submit a Zero Tax Declaration every January to the Tax office in Spain for the ownership of the property.

When the UK Company Tax Declaration is submitted to the Tax office in Spain, along with the Company UK Certificate of Resident then under the EU Treaty, Spain has to accept the Company is a non Resident Company of Spain and cannot Tax the UK Company.

The above is how every UK Company can operate in Spain and I do not see how at any stage you are hiding anything from the UK or Spanish Tax Authorities, quite the opposite I think, this is also part of the due diligence gwm will have to make sure the UK Company has been doing when gwm looks at purchasing the UK Company mentioned which owns the property in Spain.

In relation to a trading UK Company then I am not suggesting it will be for everyone but it is an additional advantage for those who wish to take advantage of it. I know of a lady and gentleman who own in Algorfa, Alicante, and when they bought their Spanish property into a UK Company structure they then setup a dog grooming business which operated through the same Company and when they submit their Company accounts to the Tax office in the UK they are classed as a trading Company, no problem here.

This message was last edited by Property On Finca Parcs on 17/08/2011.

Thanks for the reply.

But you have failed again to mention the EU treaty. As far as I am aware there is no EU wide treaty to which all member states have signedup to? We have EU directives but it is to each country to implement. The ony treaty I am aware of that would be relevant here would be the UK/Spain DTA and article 13 says CGT is payable where the property is physically located.

Spain has anti-avoidance legislation aimed at real estate holdings and despite the UK Ltd company owning the asset the tax office could say the change in ownership of the shares is a change in ownership of the property.

But there are more taxes at stake here than just profit tax and even though a company may declare it's profits in its country of residence it does not exempt it from other taxes due in the jurisdiction in which it is doing business.

It is for this reason many non-Spanish companies need to acquire CIF numbers and register for Spanish VAT/IVA.

Let me give you a simple example a UK company engaged in Spanish real estate must pay Spanish IVA on all commisions even if it has no place of business in Spain. The same applies to a Spanish company doing business in UK. It is not the location of the supplier but the location of the property that triggers the liability. No treat or DTA can alter that fact!

Also I believeo n the annual tax return you must declare the ultimate owner of the property and that is where you are at risk.

 Great thread, lots of valid and interesting points, thank you for contributing.

It is interesting to note that both Westholme and Wincham Consultants work out of the same address! Makes some of the comments they have made look well at least strange. As if one didn't know the other. Hey guys we are not stupid! The earlier comment about ducking and diving seems to apply to both of them! Sorry what am I saying it is the same. I can't understand how these guys spend so much time on different forums. They must be making a lot of money out of anyone they 'catch'. Please move on somewhere else.

Westholme address

WINCHAM HOUSE
GREENFIELD FARM TRADING ESTATE
CONGLETON
CHESHIRE
CW12 4TR

Wincham Consultants Limited

A Division Of
Wincham Investments Ltd
Wincham House
Greenfield Farm Trading Estate
Congleton
Cheshire, England
CW12 4TR

Look who is involved with them

'Spanish Lawyer’s View

Introduction by Maria L. de Castro
Maria is a Legal Advisor in Spain.

And on it goes. The above is from their sites.

This message was last edited by kev2006n on 14/09/2011.

I have been reading Eye on Spain for a long time but haven't posted before so "Hi".

First things first - cards on the table. I am an English Lawyer who has been dealing with Spanish Law for over 17 years. I have helped many people buy and sell properties and have advised them on which is the best form of ownership for them. I thought it was important to mention that so that everybody knows who I am and that there is accusations of secret agendas.

I beleive that the form of ownership is one of the most important decisions that you can make when buying a property abroad (Spain or elsewhere). Getting this wrong can cost you thousands of pounds in extra tax or costs. However, there is no "one size fits all" as everybody's circumstances are different. I have advised some clients to buy inthe name of UK companies. I have also advised some clients that that is the worst thing that they could do. It is important to look at the circumstances of the case and the impact both in Spain and the UK in terms of taxes and costs. You need to look at what you are trying to acheive, your timescales, your personal circumstances and also your inherutance wishes.

Buying through a UK company does have its advantages - mainly in terms of Inheritance tax and capital gains tax in Spain. A UK company will also normally be excempt from the 3% Special tax on foreign company ownership in Spain. However, you need to balance this against the cost of running the company each year. In many cases the tax savings can be acheived (or at least significantly reduced) in other ways. It is important to balance out all the options and then work out which is the most cost effective. In some cases I have seen that the cost of running the company for many years outweighs the tax savings!

It is also important to remember that not everybody wants to buy in the name of a company. If you do it can be disadvantageous for the company to sell the property when you want to dispose of the property rather than you selling the company (which in turn owns the property). It would be interesting to see whether the seller in this case would be willing to have the company sell the property rather than to sell the company. If he isn't then he is going to limit the number of potential buyers he can reach. This would also be a problem for the new buyer if they bought the company. Ask the question and report back to us - I would be interested to know as I have had purchases fall through because of this.

Companies can make sense for some people but not everybody. I tend to like to keep things simple as that way people understand what is happening and any future buyers can as well. I tend to use companies for clients buying higher value properties rather than the sort thatt the average man in the street would buy.

The main message is that each person's circumstances are different so what is right fro one may not be right for another.

Peter Esders

Chebsey & Co

Esders,

Its interesting your first post is on this subject. You claim to be mentioned  or quoted by 'A place in the Sun' in your blog. Of course you know Wincham claim to have an award from 'A place in the Sun'. As I said interesting.

This message was last edited by kev2006n on 14/09/2011.

 kev2006n,

The reason why I decided to post on this subject is because it is a subject that winds me up. I have seen too many people take bad advice on this and end up with situations which are not appropriate, which has ended up costing them money. I have also seen too many people encouraged to go down the company route when the main people to benefit from that advice are the people who charge for running the companies rather than the buyers. I am not generally a fan of company ownership or people who blanket encourage company ownership.

I am not sure what you are driving at with the A Place in The Sun comments. I didn't mention A Place In The Sun in my post and deliberately stayed away from mentioning them in my previous post. However, now that the subject has been raised I would like to clarify some confusion. Wincham entered the AIPP Awards, which were awarded at the A Place in the Sun Live exhibition. The awards were not A Place in The Sun Awards althoughh APITS did support them. The previous post may give the wrong impression and it is important that the correct situation is explained. Yes, I have been quoted in A Place in the Sun on various occassions. I also helped judge the AIPP Awards. I don't think that either of these facts have any relevance to the original question - hence why I didn't mention them before.

Peter Esders

Chebsey & Co.

I too am a lawyer, albeit retired.  I have considered the private company purchase for my own needs and rejected it as too risky and too expensive. (I believe some transactions have resulted in prosecutions for fraud.)  The inheritance tax rules in Spain are pretty certainly about to change in the near future to remove any discrimination against non-residents as a result of my complaint to Brussels.  We should not object to paying our share of taxes providing it is done fairly and on a level playing field - unfortunately not always the case in Spain.

 Esders,

Fair enough. 

norm de plume,

Good point. The Inheritance tax rules have gradually been changing over the last few years and I suspect that you are right that they will change to be more equal in the near future - after all, we only have to look at what happened with Capital Gains Tax! Good luck with your complaint and keep us posted.

Peter Esders

Chebsey & Co