Antonio Flores’ Blog

Anyone who watched Piers Morgan Marbella documentary, shown on ITV, will remember him saying that the city’s Golf Valley has more golf courses per head than anywhere else in the world. Anyone who watched the programme and lives or has an apartment at Arenal Golf, in Benalmadena, will wriggle with anger when reminded that they should have been an element of that statistic if Arenal 2000 had fulfilled the promise of building an 18 hole golf course.

From a legal point of view this is textbook contractual misrepresentation and any eager litigator would enjoy a hearing against Arenal 2000 developer lawyers (now Prienesur, or CajaSur) when comparing the undertakings made in the promotional literature with the photos taken by our surveyor:

“ The privileged owners of an apartment in Arenal Golf will benefit from both adult and children swimming pools, a fully-fitted gymnasium, two paddle/ tennis courts and a golf share in the exclusive ‘Arenal Golf’ 18 hole course that Arenal 2000 is building specially for the promotion”.

Also,

“Within the development there will be extensive landscaped garden areas with palm trees, rockeries and tropical plants.”

This is what the developer promissed purchasers: 

Artist's Impression shown on Arenal Golf Promotional Brochures

This is what the ‘golf course’ looks like today:

View of the 'Golf Course' at Arenal Golf on December 2009

It appears that already some action is being taken by local residents, one of which has managed to register the domain name www.arenalgolf.com, and has created an Arenal Golf forum and blog. However, it is not clear if any legal action is being taken against Prienesur/CajaSur and the Spanish Church, the ultimate owners of this mess.

Legally speaking, it may now be somewhat late to cancel the purchase and undo title deeds, etc., but for private purchase contract holders who are being asked to complete by Prienesur they should be able to oppose them quite successfully on the above mentioned grounds, in my opinion. However, I would loath to guarantee that this would be the case with every single judge. And the reason is that Prienesur could argue that this is not a fundamental breach of contract but a breach of an ancillary obligation which in no way impedes the economical objective or legitimate expectations of the buyer, who has received the promised unit (the basis for obtaining a favourable ruling).

What our firm is doing with the clients we represent is asking them to bring as much possible evidence of their craze for the sport, so as to prove that it was this and not the apartment in question that made up their minds to part with the money. This evidence could be in the form of golf membership cards back home, invoices proving they are avid golf equipment and paraphernalia buyers, pictures of them hitting a few balls with Tiger Woods and even divorce legal suits on grounds of desertion or abandonment due to excessive morning golf + evening pub crawling. After all, litigation is about law as much as it is about proving a point!

Antonio Flores Litigation, Property Arenal 2000, Arenal 2000 Benalmandena, Arenal Benalmadena, Arenal Golf, Arenal Sur 21, CajaSur, Prienesur

A few weeks ago I was met with an inheritance tax problem enquiry from an elderly lady who had a flat in a Benidorm tower building which she had purchased back in the seventies.

She told me that she had been approached by a company (did not disclose the name) offering her to put the property into a company so that the inheritance problem went away. As I found the enquiry rather strange I decided to make some research into this new proposal. When “googling” IHT Spain, I came across a company called Wincham Consultants Limited. The opening line was somewhat exciting and the following phrase caught my eye instantly:

“Wincham supply a service that we believe is the only legal way of truly safeguarding your assets against inheritance tax”.

To my surprise, that service was the only legal service they were providing (other services included selling houses, renting cars and sourcing cheap flights). Well, this one and only service is no other than setting up a UK company and transferring the property to it.

Further on, I clicked on for more information and arrived at a specialized website in inheritance tax, www.winchamiht.com, whose only service in respect of this tax was, again, setting up UK companies. The opening pitch certainly scares the hell out of anyone:

“SPANISH PROPERTY OWNER? When the time comes…Your heirs WILL be hit with a 40%+ Inheritance Tax Bill unless you act now to protect your legacy”

Which is another way to say:

SPANISH PROPERTY OWNER, when you pop your clogs you better have hired us because otherwise your children are going to be truly f****d!!

You see, the problem with these type of companies offering one single service is that any other alternative you come across is quickly dismissed with, at best, harsh negative criticism and at worst, untrue statements. The word impartiality disappears like sand slipping through your fingers and you never get the true picture.

Inheritance tax planning is a fairly complicated matter because each case is different. In other words, no solution is full-proof and certainly using a UK company is possibly the last best if not the worst. So when reading Wincham’s statements I could not but pick a few out and comment on them:

1. Wincham IHT claims that IHT in Spain is 40% +. The truth is that according to a most recent survey, the average IHT bill paid in Spain in three consecutive years has not been higher than 13% (per inheritor), on the taxable base (which rarely is the value of the property).
2. Winchan IHT claims that “your husband and wife will NOT be exempt from IHT”. The truth is that approximately 300,000 UK citizens residents of Spain may be exempt of IHT in respect of 95% of the value of the property when they inherit from their spouses, just like the rest of Spaniards!
3. Wincham IHT claims (FAQ number 14) that in terms of IHT the recipient of the UK company IS technically liable but subject to BPF (Business Property Relief). They then say that there are a number of rules surrounding this circumstance but that assuming that BPF is applicable then there would be no IHT. Good Christ!! This is like saying that if IHT disappeared altogether there would be no IHT, or if the planet world exploded then you would not have to worry either! The truth is that, for all it matters, BPF is ONLY applicable to relevant business property which is used for the purpose of, you guess, doing business, and this leaves out companies dealing in land or building companies making or holding investments (not to mention holiday homes). I am aware that the UK HMRC is now looking into claims for BPR very closely and in fact these are being sent to a department called Technical Team (Litigation) for detailed consideration. I cannot possibly see how the inheritors of our 82 year old expat living quietly in a 9th floor flat in Benidorm are going to get through the merciless Revenue & Customs officials when these get grab of the file. In summary, I would think that only a few properties could really qualify for BPF and even if they qualify it has to be pointed out that BPR is easy to lose… often at a time when IHT planning is most crucial.
4. Winchan claims that transferring ownership of a property from an Offshore company to a UK company will also completely remove Spanish IHT (FAQ number 17). The reality is that having property in an offshore company is possibly the most inheritance-tax efficient set up one can have (through concealment that is and so, not so legal!) so I cannot see why would some want to switch to one of the less inheritance tax-efficient set up.

To summarize, proposing only ONE system to minimize or mitigate Spanish IHT is in my opinion not sound advice. Inheritance tax can be reduced, avoided, evaded or even paid, as the case may be, and tools to achieve these may involve offshore companies, onshore companies, taking out mortgages, keeping quiet for 4 years and 6 months from the date of death of the testator (option chosen by some clients so as to have the tax obligation “timed out” under statute of limitations) and sometimes even incorporating UK companies, and only if a UK qualified accountant (ACCA or equivalent) signs a letter saying that no IHT is applicable in the UK.

The verdict I gave to our test-case Benidorm distressed lady, who wants to leave the property to 4 inheritors, was to draw-up her Spanish will and relax. And in respect of IHT? Well, do absolutely nothing because her €300K property would be transferred to her 4 children for a mere €5,800 per inheritor, or €23K in total, in application of the Spanish Inheritance Tax Act. Fees for setting up a UK company plus costs, taxes and miscellaneous were quoted at around €7,000 to which one would need to add transfer tax (€20,000), which means that this proposed scheme was rather more pointless and even counter-productive than essential.

So Wincham, don’t you think it’s all Much Ado About Nothing…?

Antonio Flores Inheritance IHT Spain, inheritance tax in spain, inheritance tax spain, spanish iht, Spanish Inheritance Law, spanish inheritance tax, Wincham