Limited Company to protect yacht from Spanish Residency issues

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Anonymous

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We are becoming borderline on de facto residency in Spain (>183 days in one calendar year) after which there is a possibility that the Spanish authorities might deem us to be de facto residents, charge taxes on the yacht and require her to be re-flagged. We cannot an will not let this happen as the cost would be too great.

I have heard that people protect themselves by putting the yacht on a limited company, registered in the UK. I have no other UK limited company to use so I would have to buy an off the shelf company to do this.

Does anyone here have experience of doing this or specialist knowledge, or can they point me to appropriate specialist knowledge (the general purpose accountant or solicitor might not have a working knowledge of this subject).

My questions are these:-

Presumably I buy an off the shelf company. We have no intention of trading or putting costs through the books - is this a problem? All we intend to do is to use the company to act as an intermediary so that the Spanish authorities cannot impound the yacht on the grounds of our residency.

Can I use a third party address as a registered office as I don't want to use my relative's address for this sort of thing? Are there any specialist companies that let you use their address for a small fee?

What are the annual costs for filing the annual statement, etc.? I reiterate that we will not be trading at all. I haven't owned a limited company for over twenty years and might be horribly out of touch.

As soon as the company is formed, how do we transfer the yacht? Do we have to issue an invoice to the company? What paperwork is required - this must be properly done so we don't have problems when we come to sell. How do we inform the Register (we are Part 1)?

Are there any risks in doing this? e.g. are there any taxes on yachts owned by companies, for example? Might I have trouble in unscrambling this when we sell?

Any other comments, please, or alternative suggestions.

Many thanks in anticipation.
 

Shearwater

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We've had no problems with or visits from the Guardia Civil in the four years we've had a boat (12 months/year in the water) but it maybe because our town is a bit of a backwater - with a huge majority of Spanish owned, small and lowish value leisure craft. I would be interested to know what experiences others have had / are having and perhaps research here may help you with your choice of action?.
 

BlueSkyNick

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[ QUOTE ]


Does anyone here have experience of doing this or specialist knowledge, or can they point me to appropriate specialist knowledge (the general purpose accountant or solicitor might not have a working knowledge of this subject).

[/ QUOTE ]
Mine would, I am sure others could help too.


[ QUOTE ]
Can I use a third party address as a registered office as I don't want to use my relative's address for this sort of thing?

[/ QUOTE ]

Yes you can, we actually use our accountants office as registered address and all official correspondence goes there.
[ QUOTE ]
Are there any specialist companies that let you use their address for a small fee?

[/ QUOTE ]probably. our accountant doesnt' charge anything for this facility.

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What are the annual costs for filing the annual statement, etc.?

[/ QUOTE ] £15 for an annual return to companies house.

[ QUOTE ]
As soon as the company is formed, how do we transfer the yacht? Do we have to issue an invoice to the company? What paperwork is required - this must be properly done so we don't have problems when we come to sell. How do we inform the Register (we are Part 1)?

[/ QUOTE ] dunno, sorry

Are there any risks in doing this? e.g. are there any taxes on yachts owned by companies, for example? Might I have trouble in unscrambling this when we sell?

[/ QUOTE ] dunno - would be guessing these bits, sorry

[ QUOTE ]
Any other comments, please, or alternative suggestions.

[/ QUOTE ]

I would be confident that Steve Clayton's advice is reasonable - having once bought a boat from him !!
 

BrendanS

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Not sure about the boaty side of things, but you can easily buy a company off the shelf to any requirements, or just set one up with online companies, with address for registered company, who will forward any official mail to company director address. Official mail forwarding free, other mail forwarding usually carries a cost.

You will need at least one director, and one company secretary, so need addresses for both of those, as legal requirement.

Accounts can be filed online with Companies House these days, and you receive a rebate for doing so, though that is reducing with time.

PS, that for Lemain, not you Nick
 

Liz_I

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We did have friends that were obssesed with this issue and others, ie: owning a car etc. We've been in the EU - non UK since '98 Had no issues regarding residency. I'm sure it will come, however there is so much talk and rumour over this that it must be a problem for those who wish to ' tow the line' - We have just - after 4 years out of 5 - wintering in the same marina - been visited by the Douane. Very nice guys, no probs - just produce the docs. Advice FWIIW - go sailing in the summer - doesn't matter where to. There is no control, but if you are a worried sailor go to Tunisia or similar & get your papers stamped! PLSE don't make a big issue over this. It will surely come but until then - as the past forum posts; re; legislation; leave it well alone, if you value your freedom don't make waves!!!
 
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Anonymous

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Thanks all.

Do you know if one has to file a tax return to the Revenue over and above the annual return to Companies House?

Are there any special yacht taxes as a percentage of the value, or similar that I might be stung by?

I am proposing to ask my insurers what their position is.... I will have to have the policy transferred into the name of the company or wound up and re-issued. Anyone had a problem with boat insurance via a company?
 

Grehan

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Having/forming the company is no big deal - quite straightforward - and the Annual Return is painless if the company has essentially not been trading or having very little activity. It would not be necessary to involve an Accountant, for example.
The bigger questions are more . .
i) Would having one's boat owned by a separate entity [company - or another person] from the [permanent, live-aboard] on-board skipper and crew create a problem - if and when one's papers were checked by, say, the Aduana?
ii) Is there an Insurance implication? - e.g. cost
iii) Does the company-ownership or third-party-ownership strategy actually work, vis-a-vis the Spanish residency-special taxation problem?

I asked the first two questions on YBW a while ago and got only a few responses, the drift of which were that there seemed to be no problems about company boat ownership.
The third question is the killer and I would suspect there are no clear answers, only supposition.

[As an aside, for those that aren't familiar with this kind of situation, what Lemain is asking about might be described as 'special taxation' in respect of having one's boat in Spanish waters for more than 183 days [total] in any year - <u>and</u> being aboard/cruising. This one-off special taxation charge can amount to 14% of the boat's value - see http://www.telefonica.net/web2/grehan/isdmt/ . And there are also knock-on implications of re-registering as a Spanish vessel, skipper qualifications, etc. Assuming I read Lemain's original question right . . what this is not about is avoiding 'normal' taxes and responsibilities]
 

Steve Clayton

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[ QUOTE ]
i) Would having one's boat owned by a separate entity [company - or another person] from the [permanent, live-aboard] on-board skipper and crew create a problem - if and when one's papers were checked by, say, the Aduana?

[/ QUOTE ]
Possibly; depends on what the boat is being used for. In my case it's skipper charter. I am licenced and authorised by the Spanish authorities as the skipper (they actually identify me as a ferry captain!!). Never been stopped/boarded/inspected yet but have had a couple of close up visual checks - maybe I'm on a register???
[ QUOTE ]
ii) Is there an Insurance implication? - e.g. cost

[/ QUOTE ]
In my case the answer is no - although I was uplifted to pay the first £750 of any claim. I found UK insurance was cheaper than Spanish- and there are other benefits which I won't disclose here.
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iii) Does the company-ownership or third-party-ownership strategy actually work, vis-a-vis the Spanish residency-special taxation problem?

[/ QUOTE ]
Works OK for me. If company owned then when you use it privately then you are supposed to pay the company.

Nick; proposing to do the SBS for a couple of days (promote Seraph for corporate activity) so a meet up for a drink seems sensible. Will email later when we know dates
 

david36

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If you go down the company route then don't forget to take into account the tax and associated regulatory implications upon the company ( as opposed to you, the company majority shareholder). For example, if a UK registered company owns the boat then there may well be an income tax liability on your personal use of it ( a benefit in kind); also there may be minimum wage implications and hence PAYE taxes if you can be judged (by the tax man) an employee of the company plus national insurance etc etc. It would be as well to keep in mind that these matters will be decided by the usually less than sympathetic folk in the Revenue, VAT and tax offices of the UK. Obviously,if company is elsewhere or even offshore, eg Gib, then a whole diffferent set of of rules will apply. It would be best to bear them in mind from the beginning. Good Luck. Please keep us posted on your progress.
 

aknight

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Can safely help on a couple of these, but not all. The ones I can answer are as follows:

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Can I use a third party address as a registered office as I don't want to use my relative's address for this sort of thing? Are there any specialist companies that let you use their address for a small fee?


[/ QUOTE ]

Yes, in fact many company owners do exactly that to avoid getting post and other things, e.g. bailiffs, turning up at home. Do a Google search for 'registered office service uk' and you'll find lots of providers. You can also ask a solicitor to provide the same service but they can cost more, and fewer and fewer of them offer the service nowadays. Smaller firms of accountants also offer a similar service.

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What are the annual costs for filing the annual statement, etc.? I reiterate that we will not be trading at all. I haven't owned a limited company for over twenty years and might be horribly out of touch.

[/ QUOTE ]

Assuming you fill in the return yourself (not challenging for a company as simple as the one you are considering forming), there is just a filing fee to pay - currently £30 for a paper return or £15 online.

Lots more info and very helpful guidance notes at

the Companies House Website
 
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Anonymous

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[ QUOTE ]
For example, if a UK registered company owns the boat then there may well be an income tax liability on your personal use of it ( a benefit in kind); also there may be ......

[/ QUOTE ]Very good point. We certainly don't plan to trade the company, draw a salary or pay NI via the company but is that sufficient to prevent us being taxed as benefit in kind? Does anyone here know?
 
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Anonymous

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We are calling into Gib in a few weeks...you are the second person to mention that today. What are the advantages? We don't want to get involved in any tax evasion so if we would legally be due to pay UK tax, then we would declare it.

It is the Spanish situation that we are trying to avoid as we consider ourselves to be UK Citizens and taxpayers simply on an extended holiday, not de facto residents. Would Gib ownership be a red rag to a bull, given that we do want to stay in Spain for the time being?
 

WowdyWebel

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Not much to add to above. I think the following may have been missed.

A dormant company can simply advise the IR that is its status . They don't bother you on this really, provided of course it is genuinely dormant.

If the yacht is mortgaged that would be an issue. Ditto insurance which has already been covered.

You would need to think about how the yacht became the property of the company. The yacht obviously has value and a shelf company has no capital. The obvious way, although perhaps not attractive or feasible is for you to capitalise the company and the company buys the yacht from you. The cash flows are obviously circular so you are not out of pocket. An alternative may be transfer the yacht for a non cash consideration in return for being issued for shares to an equivalent value. You'd need some advice as non cash consideration issues can be tricky.

It would make a lot more sense I suspect from a tax perspective if you had some sort of income derived from the boat, even informal chartering. If this income was otherwise taxable in your own hands you would be able to deduct legitimate operating expenses - this probably assumes you still have UK residency.

With the whole arrangement you need to be wary of not being trapped by "form and substance" issues.

I am a non exec of a Gibraltar based business and there are some very good advisers there. Not cheap but very good. There whole modus operandi is to help with tax efficiency issues so I doubt anything you asked them would surprise them.
 

thailand69

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[ QUOTE ]
de facto residency in Spain (>183 days in one calendar year) after which there is a possibility that the Spanish authorities might deem us to be de facto residents, charge taxes on the yacht and require her to be re-flagged. We cannot an will not let this happen as the cost would be too great.

[/ QUOTE ]

I am not au fait with Spanish tax, are you are saying that if YOU are deemed to be resident in Spain that they tax all your assets (in UK and Spain and elsewhere) or just those assets in Spain........or only boats?

or

Is it the Boat that is deemed resident after 183 days (in 1 calender year) in Spain?


As I think you have hit on already the risk is that whatever you do may simply be "Looked through", not just from the locals being awkward but most countries have extensive "anti taking the p#ss" legislation nowadays when it comes to tax........and imposing penalties /forums/images/graemlins/confused.gif

But anyway, here is my 2 cents (pesetas /forums/images/graemlins/grin.gif) worth.......

If you want to be able to (honestly) declare that you do not own the yacht then transferring ownership to a UK company (which are cheap to form and maintain and also IMO look more "respectable" than somewhere like Gib even without the problems that a Gib company may cause in Spain) would work to a degree, as long as you did not also have to declare ownership of the UK Company (or to have to explain exactly how come you have use of a boat you do not own!!).

Personally, I would re-register the boat to a UK company (Bill of sale and sale agreement etc), but have the UK company act as a nominee only for someone else (with this not disclosed in the sale agreements). The boat would appear to be owned by the UK company, but in fact would not be meaning you could file simple accounts (wot no assets!) and with no assets you cannot be getting any benefits in kind - the company has none to give benefit from!

The question then arises as to who the UK company is acting as nominee for.......if it is yourself then you may be back to square one depending on what you are trying to achieve.....but no reason why the UK company could not be acting as a nominee for your Aunty.

The UK company would issue a declaration to Aunty that it held the boat for her as Nominee only (in practice you would hold this bit of paper and if push comes to shove Aunty stops being nice /forums/images/graemlins/shocked.gif you either go to court and argue the £££ toss /forums/images/graemlins/frown.gif or simply "lose" this piece of paper /forums/images/graemlins/grin.gif. Aunty would also authorise you to use the boat and this would be issued to both you personally and also the UK company which would also issue an authority to use the Boat (covers all bases)......leaves you the option of keeping things simple when wanted (boat owned by a UK company Ltd - nothing to do with you - but you do have written authority to sign / act for the boat) but if push comes to shove you being able to explain (and prove) that you simply have a nice Aunty who lets you use a boat that is not yours, which is not impossible, even if not ultimately believed /forums/images/graemlins/grin.gif.


A problem may arise in that if the only (or all) the Directors of UK Company are based in Spain (You and the Missus?) then the UK Company will very likely (99%+!) become resident in Spain for tax purposes (same same for a Gib or other offshore registered company)......which due simply to aggro of tax reporting (even if no tax liability) is not something I guess you would want to do........or to risk being caught out on not doing.......

Whilst of course the UK Company has no Assets, it does have control over the yacht (being registered in it's name) so depending on how much you trust your Aunty you may or may not wish to also make her (or other family / freinds) the Director. No such thing as a "Nominee Director" I am afraid so you need to trust these Directors (or keep them in the dark?!), but you could use Aunty as a Nominee shareholder quite safely - you got her to declare this in writing, keep her share certs AND get her to sign a Stock Transfer Form in advance, just in case /forums/images/graemlins/grin.gif

To be honest having Aunty in the UK (or even in the EU) is not the most desirable solution......a relative way abroad (AKA "Conveniently Foreign" /forums/images/graemlins/shocked.gif) is kinda useful for tax planning /forums/images/graemlins/cool.gif........the sub continent is quite popular.......

Of course you could just get an offshore service provider to provide the Directors (Offshore!) even for a UK company. Gonna cost though /forums/images/graemlins/cool.gif. A respectable and regulated firm in a reputable Jurisdiction (ie somewhere where b#ggering off with your assets as part of a business plan is frowned upon by the authorities!) probably would set you back £2 to £3k pa.

I do not think any of the above is illegal, it may well not work either in theory or in practice (not always the same thing) but if anyone thinks otherwise, please........don't do it /forums/images/graemlins/grin.gif
 
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Anonymous

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Many, many thanks for some really informed input, guys.

I am simply trying to make us a less obvious and desirable target rather than trying to put together a complete watertight solution. AFAIK the probability of us getting a visit is pretty low in the first place. I understand that one usually gets a visit from an official who just asks questions. If they are going to take action, they then write to you claiming some amount of tax and prohibit the movement of the yacht until the matter is settled.

I am hoping to have a case at the initial meeting that makes it seem unproductive for them to pursue us. I am not prepared to lie so I won't go down the route of pretending to have spent more time out of Spain than is the case so the idea of showing a Certificate of Registry in the name of a UK company has an appeal as presumably it would at the very least be a lot more hassle for them and there are any number of other British yachts out there who have been in Spain for longer than us. Like fitting a bell box on the outside of your house, a proportion of burglars presumably go elsewhere.

However, I don't want to end up with tax problems as a result of any action we take. I like the sound of the UK company being a nominee. It avoids VAT issues as well as income tax issues. Presumably it could be nominee for us and not Aunty? Suppose we have an off the shelf company, issued share capital £2 (wife and I have one £1 share each) no assets, one director and one sec. We have no loans, no bank account and we are not trading. The boat actually still belongs to us so presumably we continue to insure the boat in our names? We continue to pay all costs and live on board.

How do we invoke the nominee status? Is this simply minuted as a decision, or is some other kind of paperwork required? To unscramble it, does the company have to minute the reversal? Do we as owners have to ask the company to be nominee and if so, is there any special form of words - and does the fact have to be registered at Company's House or elsewhere?

Otherwise, it seems that the only people who need to be informed are the Registry (and that's the whole point) and the insurers who need to be informed that the ownership and use is unchanged but that the vessel is now being held by the company as nominee?

Thanks again for all the help
 

WowdyWebel

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I don't think any arrangement of this sort works if you are a shareholder in the company which owns the registration. The purpose of nominee arrangements after all is to put distance between the ultimate owner and any tax liability (often perfectly legitimately). The UK company I think would have to have nominee directors and nominee shareholders. You would then have to have some sort of side arrangement, such as a signed transfer form, so that you could take back control of the entity should it be required. This sounds like avoidance to me.

None of this particularly safe to me. I think a sensible way of looking at these things is that the taxman always follows the money - if he ever came to visit you it would be best if you could demonstrate you had no economic interest in the asset -that must involve giving up ownership one way or the other. Its not much point having a company own the asset if the taxman can then seize your share in the company as it amounts to the same thing.

I really would explore the professionals in Gib. My business has to nominate all the day to day running to the Gib entity to nominees and this works perfectly well. It is not the wild west there financially - Grant Thornton have a branch there who are pretty good.

Alternatives

- transfer to Aunty full stop.

- without wishing to be flip - winter somewhere else!
 
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Anonymous

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Thanks, that's clear. What is the benefit of using Gib as opposed to UK? The downside seems to be that it might upset the Spanish and I don't suppose that I really need to have a face to face to set up this sort of thing, do I? Could be London, Channel Islands, or wherever? I have no experience of offshore business and am completely in the dark on that.
 

Grehan

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. . isn't there a potential pitfall regarding VAT if the boat is "Gibraltar owned", since Gib has opted out of the EU financial regime (sorry if that's less than accurate, but I think the VAT question still applies). ?
I also have an impression that the cost of a Gib company is quite pricey, also Gib boat registration.
From the p.o.v of ducking under the Spanish special taxation situation, would not UK 'distanced' ownership/registration be simpler and just as effective?
 
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