The Sharks Exposed - New Costa del Sol Action Group

Spanish Inheritance Tax
and Income Release Scheme (SITIRS)
During the winter of 2004/2005, Churchill
Personal Investments began to promote the
above scheme to their clients, via their quarterly
“Financial Focus” publication and their Personal
Consultants, or “Advisers”. A depressing picture
was painted of the likely Spanish inheritance tax
bill, which a surviving spouse would face on the
death of his / her husband / wife, if the ownership
of a Spanish property was involved. This would be
even worse if the couple were unmarried.
In Churchill´s Winter 2004, Issue 34, Financial
Focus, in an article entitled “The IHT Solution”,
the following was claimed. “We will now highlight
a fairly simple strategy that can dramatically
reduce this tax liability. The best solution is often
to reduce the net value of your property in Spain.
This is because the tax is levied on the actual value
less deductible charges, debts and expenses.
Therefore, if a “charge” (loan) is legally registered
against the property(ies), then the outstanding
amount would be deducted from the value
before arriving at the net amount subject to tax.
If the released capital is invested in a tax-efficient
investment vehicle, this can dramatically reduce
the liability to Spanish inheritance tax. In this light
there has been considerable development work
undertaken with many international banks, and
a number of schemes have been launched over
the last year or so. In our opinion, many of these
have serious drawbacks, but a recent launch
has addressed these failings and provides an
excellent solution. The Spanish Inheritance Tax
and Income Release Scheme (SITIRS) represents
a valid approach for many expatriates”.
so far aware of investments being made in the
Premier Balanced Fund and the International
Capital Accumulation Fund, although there may
be others. The aim of the investment is to provide
sufficient growth to pay not only the quarterly
interest due on the mortgage, but also to pay an
annual cash release of 2% during the first five
years of the mortgage.
The scheme was promoted by Churchill as being
of low risk. The Premier Balanced Fund brochure
describes the fund’s investment objective as
being “within a relatively low risk and secure
environment”. In a separate brochure by the
Premier Group, entitled “SITIRS – Spanish
Investment Transfer and Income Release
Scheme” (note the difference in the second and
third words), Premier stated that “In conclusion,
the SITIRS structure for residents does mitigate
and reduce the Spanish ISD tax (inheritance tax)
liability resulting from the decease of the Spanish
resident property owner.
In the opinion of the CDSAG’s solicitors, the
scheme is illegal and should never have been
promoted and sold in the first place. Their main
reasons are that the Spanish tax authorities
do not accept this type of investment as a way
of avoiding or reducing inheritance tax, the
companies involved do not have the necessary
registration and licences, and the investment
funds are high risk, contrary to the promotional
information provided at the time.
This was the forerunner to Equity Release and
has the same dire results. If you are a victim of
The scheme involves a charge being registered this scheme, and would like further information
against your property, in the form of a 10 year and assistance, please contact John Parsons, the
interest-only mortgage from S L Mortgage Funding CDSAG Secretary, at JohnP@costa-action.co.uk
No. 1 Limited, with the released funds being used or 952 884 261.
to buy shares in an offshore investment. We are
24 www.costa-action.co.uk