Inheritance tax - property abroad

thestens

My mum has died and we think the estate will be due to pay inheritance tax. I have read that I have to declare her property in Spain for this purpose, along with other assets. The house is left to me in her Spanish will. Does the fact that she has a Spanish will mean that I will pay tax in Spain on the house and not here? I also read that you shouldn't be taxed on foreign property in 2 countries. So do I still need to declare it here?
The other problem is that the house is basically unsaleable. The two next door have been for sale for years. To sell it, I would have to put it up for sale at a ridiculous price, like £24 000, for example. I don't want to sell it at the moment anyway, but don't want to have to put an unrealistically high value on it for inheritance tax. if I do have to declare and value it in UK, will a low (but realistic in today's Spanish market) valuation cause problems with the taxman?

g6jns_2

thestens wrote: »

My mum has died and we think the estate will be due to pay inheritance tax. I have read that I have to declare her property in Spain for this purpose, along with other assets. The house is left to me in her Spanish will. Does the fact that she has a Spanish will mean that I will pay tax in Spain on the house and not here? I also read that you shouldn't be taxed on foreign property in 2 countries. So do I still need to declare it here?
The other problem is that the house is basically unsaleable. The two next door have been for sale for years. To sell it, I would have to put it up for sale at a ridiculous price, like £24 000, for example. I don't want to sell it at the moment anyway, but don't want to have to put an unrealistically high value on it for inheritance tax. if I do have to declare and value it in UK, will a low (but realistic in today's Spanish market) valuation cause problems with the taxman?

The Spanish property will have to be dealt with under Spanish law. You need the help,of an English based specialist. This has nothing to do with the UK HMR&C. The reason the properties have not sold, oyher factors excepted, is the price is too high. I assume the probate value will be the genuine open market value.

laslomas

I am so sorry that as well as losing your Mum you now have all this to deal with. It is not easy and you will definitely need the help of a lawyer. I returned to the UK from Spain in 2013 after I had to deal with tax and property problems when my husband died. One problem with Spanish property and the Inheritance tax law is that it varies by region, so the tax to pay will depend on which area the property is in. Also you cannot accept the inheritance without first paying the tax, so the property cannot be sold to pay the tax. A close relative, as you are, will be liable to pay less tax than a distant relative or a friend would as there are allowances deducted depending on the relationship to the deceased before tax is calculated. The allowances also differ by region and whether the inheritor is a Spanish resident or not. I believe this part is changing as it is seen to discriminate against non residents and the EU are not happy about that. The base for the tax calculation is the value which is held on the Catastral Register (similar to our Land Registry) and a multiplier added by the local Town Hall. This could well take the fiscal value way above both the escritura (Deed) value and the real present day value. The tax has to be paid on that value even if the property has not been worth that since the property boom
I really hope you get some good advice and do not get too embroiled in the dreadful Spanish beaurocracy. Good luck.

thestens

Thank you for the helpful replies. I am not planning to sell the house at present, in fact I am not planning to do anything in Spain for a while, if I can avoid it! We aren't planning to go out until May, but as all the bills are paid by standing order I don't see any rush to declare anything there. Obviously I will have to declare the value for Uk inheritance tax and probate, but I think I'll just let things go in Spain until I feel up to facing the hassle !

g6jns_2

thestens wrote: »

Thank you for the helpful replies. I am not planning to sell the house at present, in fact I am not planning to do anything in Spain for a while, if I can avoid it! We aren't planning to go out until May, but as all the bills are paid by standing order I don't see any rush to declare anything there. Obviously I will have to declare the value for Uk inheritance tax and probate, but I think I'll just let things go in Spain until I feel up to facing the hassle !

The Spanish property must not be included in the UK probate as it does not form part of the UK estate. You would be ill advised not to get the Spanish probate delt with in a timely manner even if it is a pain to do.

G6JNS

Malcnascar wrote: »

Firstly sorry for your loss.

Inheritance tax is payable on the worldwide assets owned by the deceased if the total exceeds the nil rate band. So the Spanish assets have to be included in the IHT calculation.

Once any IHT has been paid you can then use UK probate for the UK assets and the Spanish will and proceedure for assets held there

In Spain whenever a change in ownership of the property takes place tax is payable, a bit like stamp duty. The Spanish will makes it a bit easier to deal with this.

AIUI HMR&C do not have jurisdiction over the Spanish assets. The OP needs to get paid for professional advice from a specialist law firm who deal with the law in both jurisdictions. A UK will would only be used re-used for probate in another jurisdiction if there was no valid will made there.

troubleinparadise

When completing IHT400 you need to also fill in IHT417 detailing foreign assets:

https://www.gov.uk/government/publications/inheritance-tax-foreign-assets-iht417

A tax accountant familiar with Spanish tax etc would be a good idea to check you have good advice with regard to this (most larger accountants have foreign tax experts).

g6jns_2

Malcnascar wrote: »

Please do not confuse Inheritance tax with probate.

Foreign owned assets have to be included in the IHT calculation for UK domiciled persons.

Probate is part of the legal process of administering the estate. UK Will for UK assets, Spanish will for Spanish assets

Noted with thanks. What puzzles me is that AFAIK the UK courts have no jurisdiction in Spain. I also understand that if there is no Spanish will but there is a UK one once UK probate is granted then a probate application using it can be made in Spain. Any extra explanation would be welcome. TIA

g6jns_2

Malcnascar wrote: »

As I understand it the UK Will would be valid in Spain. However, the will would need to be translated etc

more info here

http://www.novatedirectlegalsolutions.com/index.php/news-detail/administration-of-estates-with-spanish-assets

In a way it is. What happens is that an application has to be made for probate in Spain with a translation. This only happens if there is no valid Spanish will.