Spanish inheritance tax - putting property into UK company?

The old man, who lives and has tax residence in Spain, is finally getting around to estate planning. Like most expats, he's worried about the Spanish death duties/inheritance tax which is badly affecting bereaved Brits out there.

(The Spanish State demands c.50-81% of estate value in cash up front, if its a foreigner who dies. Surviving spouse is not exempt. Bank accounts, etc are frozen until the tax is paid. Lots of elderly foreigners now getting stung badly, especially since relatives are unable to sell properties in the current market. EU rules its illegal to discriminate against non-Spanish (locals have a lower rate), but - hey-ho - as its the EU the Spanish ignore the rulings anyway.)

Financial advisers (who may or may not be sharks) and reputable companies offering new-build houses in Spain (eg Taylor Woodrow), are recommending that UK nationals resident in Spain form a UK Ltd company and put their principle assets - usually their Spanish house - into it. Apparently this protects the property from a death-duty grab when the owner dies. Presumably, spouses and/or other (UK based) relatives could be appointed directors or shareholders and so be able to acquire the assets in due course.

My questions are:

1. Has anyone been down this road?

2. I can't believe the British and Spanish socialist tax-grabbers would allow a simple avoidance like this to exist - so what are the pitfalls?

a) annual expense of running a Ltd Coy?

b) HMRC view if the "inheritors" of a Spanish property are UK based?

c) what happens when the "inheritors" want to subsequently sell the property/assets?

3. Would it be a different/better option to use a non-EU offshore company (BVI, Malta, etc) to insure against future tax-grabs?

4. Any better strategies out there, apart from gifting/disposing of property and assets long before death? (And hoping your kids will continue to feed & house you with your money....)
I've seen a few discussions about this on expats forums in Spain. Some people reckon they have done it and it is quite simple. Cost of running a limited company appears to be about 200 to 300 quid a year.
Haven't, though, seen anyone say how successful this was when their spouse/partner died.
One lady here, whose husband recently died, had a bill for 8,000 euros when her hubby died as the value is not the actual cost of the house but some complicated formula relating to the land value (sounds a bit like our old rating system).
Basically, your partner will get an allowance depending on the relationship. Say you have a 100,000 euro property. Your share is 50,000. You get an allowance of around 16,000 euros and you pay IHT on a sliding scale on the remainder, in the case of a property worth 100,000 it is 16% (or was, last time I checked). So the tax would be 5440 euros. The higher the property value, the higher percentage paid in IHT. Of course, if you both pop off, your kids pay the tax on full value (less an allowance). A way around this is to put the property in the names of your kids as well. If you have two kids, the value when one of you pops off is 25,000. Take off the allowance (if the kids are under 21 the allowance is around 40,000 euros, if over 21 then the same as the adult) then the IHT would be 25,000 less the 16,000 allowance and a 16% tax on the remainder, so 1440 euros.
My property is valued at around 250,000 euros so tax would be considerable. My solicitors have suggested I put it in my (and wifes) name plus 2 daughters and 2 of the grandkids.
There is a basic guide on it here
My old man is no longer married, and just wants to leave his property to my sister and me. Going by the scale on your link, we may have to cough up around Euro 50,000 to inherit the property on his death!

I'm just surprised that you could dodge death duties by putting the property into either (apparently) a Spanish or EU company. I'm sure Brown and his cronies have made sure you can't do that with a UK property, otherwise everyone would be doing it....

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