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I own, with my two brothers, a UK property. This was purchased

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I own, with my two brothers, a UK property. This was purchased ten years ago through an offshore company. I am UK citizen and tax resident, but my two brothers are Spanish and live and pay tax in Spain. As part of our inheritance tax planning my two brothers wish to gift their respective 33% share holdings in the company to me for nil value and that I will become the sole shareholder. However, I no longer want to hold the property in an offshore company and wish to close the company and then either sell it, or transfer it to my name. Can you please advise me (a) what I need to do to register this gift of the shareholding in the offshore company being transferred to me and (b) what do I need to do to transfer the property from the company to my name and what is the most tax efficient way to do this. Thanks.
Submitted: 9 months ago.
Category: Tax
Expert:  bigduckontax replied 9 months ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. You need do nothing to register these transfers save for the requirements imposed by the jurisdiction in which the company is registered. As far as the gift is concerned it does impact on your brothers UK Inheritance Tax (IHT) affairs if they have any liability thereon here. To transfer the UK property from the Spanish company to you you the directors will have to arrange for a solicitor to organise the conveyance. If the property is registered with the Land Registry this can be done much cheaper using a Land Registry transfer, but you have to be 100% sure of the title before using this method. I have used it once to move a property whose historical record was well known between two companies within a company group. On transfer the Spanish company will be liable for UK Capital Gains Tax (CGT) on the gain made between the sale date [assumed to be at current market value] and an April 2015 valuation. I do hope that you have found my reply of assistance.
Customer: replied 9 months ago.
Hi Keith, thanks for your prompt reply, just some follow-up clarifications:(i) On the 'As far as the gift is concerned it does impact on your brothers UK Inheritance Tax (IHT) affairs if they have any liability thereon here.' Just to re-clarify, as my brothers are in Spain and have no UK tax status bar the holding in an offshore company that has a UK property as its sole asset, they won't be affected in any way?(ii) Do gifts need to be recorded by way of any sort of agreement (formal or otherwise), for example if HMRC ever raised a question in the future?(iii) Given that the property is held in an offshore company, does it makes sense given the new tax rules to keep it held there (it is worth approximately £500k) and sell it whilst owned by the company, or is it advisable to transfer to my name i.e. what is the most tax efficient manner to hold the property given that I was advised some years ago to hold it this way, but it seems that the tax laws are making it not beneficial to do so.(iv) On your point 'On transfer the Spanish company will be liable for UK Capital Gains Tax (CGT) on the gain made between the sale date [assumed to be at current market value] and an April 2015 valuation'. How do I calculate what this will be. Do I need a surveyor to say how much they thought it was worth in April 2015 and what it is worth now and then how do I calculate the CGT tax payable? And what if the property has not changed in value? Does the price the company paid for the property taken into account?(v) I understand that there is a new tax to be paid annually on offshore held properties, can you clarify how this would affect me?Am I therefore better to maintain the property in the company, or sell it to me and if so at what price as I will be the sole director once my brothers gift their shares?ThanksJohn
Expert:  bigduckontax replied 9 months ago.
The fact that they live in Spain is irrelevant John; they could still retain a liability to UK IHT. If, however, they can survive until the seven year rule is exhausted there is no problem anyway. It is always adviseable to document a substantial gift as it eases the job of an executor or administrator of an estate who has to answer questions on gifts when applying for probate. Tax laws are being successively squeezed by the current UK government as a deliberate policy to stamp out legal tax evasion. You would be well advised to seek professional advice with a view to determining an April 2015 valuation. many individuals and organisations have been forced into making such assessments. In any event, should there be a dispute HMRC will call in the Valuation Office Agency (OA) a little known part of their empire staffed by Chartered Surveyors. The VOA's main functions are setting bending for council tax and rateable values for business premises. However, all transactions in land are reported to the VOA thus giving them an excellent data base of current and historic property values. You are referring to the Annual Tax on Enveloped Dwellings. This only applies to property over 500K in value so may not apply. Full details and rates can be found here: http://trowers.com/uploads/Files/Non-UK_investors_in_UK_real_estate_-_the_UK_tax_regime_post-Budget_2014.pdf You appear to want to get rid of it, so just sell it off once you have control. The company will be liable to corporation tax on any gain made. Such gains are passed through the trading account.
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Expert:  bigduckontax replied 9 months ago.
Thank you for your support.

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