Isle of Man-based fund manager The Premier Group has launched an IHT mitigation scheme aimed at Brit...
Isle of Man-based fund manager The Premier Group has launched an IHT mitigation scheme aimed at Britons with Spanish properties.
Spanish IHT taxes the value of property received by each heir and transfers between spouses are not exempt from this, unlike the UK. Upon death, the beneficiaries of all owners of Spanish property, including homeowners resident in the UK, would be liable for Spanish IHT.
Presently, the individual allowance only accounts for e15,957, around £11,000. However, if there is a loan against the property, the amount eligible for IHT in Spain is the value of the property minus the loan.
The Spanish Investment Transfer and Income Release Scheme (SITIRS) has financing supplied by Rothschilds Bank in Guernsey and UK-based Surrenda Link Mortgage Holding. Investors can place the money raised on either a guaranteed product or an actively managed fund.
Loans to values range from 75% for the Rothschilds offering through to 95% for the Surrenda Link version dependent on the value of the property. The loans are issued in euros.
The lenders' margins vary from 1.5% to 1.75% above Euribor. which would mean variable rate loans of between 3.65% and 3.90% at today's rates, according to the Premier Group. Fixed and capped rate options are also available.
The arrangement fee for Rothschilds is e2,500 and for Surrenda Link it is 1% of the loan. Minimum loan values start at e250,000 or £165,000 and rise to e3m or £2m. Other charges for the product include a valuation fee that is dependent on the valuation of the property but the minimum is e425.
Intermediaries receive an initial commission of 4% and a trail of 0.5%.
The loans also provide clients with a 5% cash-back or capital release facility based on the property valuation, as well as a guaranteed income facility over the first five years of the loan, for those retired and looking to increase current income levels either in the UK or Spain.
Bill Blevins, managing director of Blevins Frank International, warned anyone using such a scheme needed to balance up the upfront advantages with longer-term costs.
He said once accumulated interest payments are taken into account, it may well be more beneficial for the investors simply to pay the IHT.
IHT mitigation scheme for investors with Spanish properties.
Asset backed interest only loan that has a capital guaranteed.
Rothschilds and Surrenda Link providing the mortgages.
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