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UK Tax Return

Does my mother-in-Law have to make a UK tax return disclosing her deemed income and non-resident tax

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My Mother-in-Law owns a villa in Menorca and has to pay tax as a non-resident to the Spanish tax authorities by using a tax return 210. This tax is calculated on the rateable value of the villa, as she and the family are the only ones who use this as a holiday home, so she receives no income whatsoever, either rental of otherwise in Menorca.

My question is, does she have to disclosure this to HMRC by completing a tax return and claiming a credit under the double taxation treaty with Spain. She is a UK resident and non-tax payer and under this treaty would not create an overpayment, just a credit if any tax was due, that I doubt anyway.

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By David Ex
18th Jun 2021 18:30

What reportable “deemed income” do you believe arises, for UK tax purposes, from ownership of the villa?

I can’t see anything that requires reporting to HMRC and certainly no credit for the Spanish tax.

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Replying to David Ex:
BirdnCo
By BirdnCo
18th Jun 2021 19:17

See below:

Spanish property tax

If you own a property in Spain and are living in it on 1 January in any given year, you must pay a local property tax or Impuesto sobre Bienes Inmuebles (IBI). The amount is the rental value multiplied by a tax rate set by the local authorities. This applies to non-residents and residents. There is also basura, a rubbish collection tax. Non-resident property owners may also need to pay imputed income tax at flat rates on potential rental income on Spanish property.

If you sell a property in Spain, you have to pay a property transfer tax, Impuesto Transmisiones Patrimoniales (ITP). When a property is sold, the local authority charges a tax on the increase in the value of the la Who has to pay Spanish taxes? A guide to taxes in Spain, including up-to-date tax rates, VAT, income tax, property taxes, and taxes for non-residents.
If you are living and working in Spain, you are liable to pay income taxes in Spain on your income and assets and need to file a Spanish tax return. Whether you pay Spanish taxes on your worldwide income, or Spanish-based income only depends on your residency status.

And

If you’re a resident of Spain, you must pay Spanish tax on your worldwide income. Taxes apply on a progressive scale, although tax deductions exist. If you are a non-resident in Spain, you only pay tax in Spain on Spanish income, typically at a flat rate. This also includes potential income on Spanish property even if you don’t rent out your property.

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Replying to BirdnCo:
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By David Ex
18th Jun 2021 20:16

BirdnCo wrote:

See below:

Spanish property tax

See above.

I thought you were asking about UK obligations which I believe are none.

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Replying to BirdnCo:
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By Paul Crowley
18th Jun 2021 22:10

Just a Spanish version of rates, collected by local authority

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By Hugo Fair
18th Jun 2021 20:30

"she receives no income whatsoever, either rental of otherwise in Menorca."

On that basis (taking you at your word and not knowing whether there are other factors we'd need to know), why would you think she has anything to report to HMRC?

[It would be a different, and more interesting matter, if she was getting rent that she needed to declare to HMRC but wasn't sure which of the taxes paid in Spain could be 'offset' to reduce what's due over here. But 'no income but paid taxes' is as relevant to HMRC as 'no income but bought some sun-loungers'!]

For the avoidance of doubt a "double taxation treaty" can only be of relevance (and even then not always) where tax is due to the two tax authorities - which you've assured us is not the case with regard to HMRC and any activity in Spain.

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BirdnCo
By BirdnCo
18th Jun 2021 21:04

The reason I have asked this question as if you are non resident and own a property in Spain you have to pay tax there that is based on the property rateable value. So although she doesn’t receive rental income she pays tax. My question is, does she have to disclose this to HMRC or not? If she does, then double taxation can be claimed as per my original post? This is a strange taxation that most do not understand in the UK. Thanks if you have any thoughts?

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Replying to BirdnCo:
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By Matrix
18th Jun 2021 21:14

Three esteemed posters have told you (based on your facts) there is none. The deemed tax is charged (only) under Spanish domestic law.

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Replying to Matrix:
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By Tax Dragon
19th Jun 2021 06:41

To be fair, I would not advise anyone to take the word of three (four including you) esteemed posters if they didn't understand (/couldn't verify) what was being said. I certainly wouldn't put querists off coming back to clarify. So I'm not sure I agree your point. In fact, I'm fairly sure I don't.

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Replying to Tax Dragon:
BirdnCo
By BirdnCo
19th Jun 2021 08:40

Thanks Matrix. I have already written to HMRC anyway, so was just asking if others had any thoughts, or even the same situation. There must be others who own property overseas. Like I said earlier thanks to everyone for their generous contributions.

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Replying to Tax Dragon:
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By Matrix
19th Jun 2021 09:00

Tax Dragon wrote:

To be fair, I would not advise anyone to take the word of three (four including you) esteemed posters if they didn't understand.

Well, why post at all? I only reply to accountants by the way so make some assumptions that the poster will understand.

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Replying to Tax Dragon:
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By David Ex
19th Jun 2021 09:37

Tax Dragon wrote:

To be fair, I would not advise anyone to take the word of three (four including you) esteemed posters if they didn't understand (/couldn't verify) what was being said. I certainly wouldn't put querists off coming back to clarify. So I'm not sure I agree your point. In fact, I'm fairly sure I don't.

As Any Answers questions go, this was one of the clearer ones. The OP said his mother in law has a property abroad which she doesn’t let and asked if there were UK tax reporting requirements and any credit for Spanish tax paid. I struggle to construct a scenario where the answers I, and others, gave are incorrect on that basis.

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Replying to David Ex:
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By Tax Dragon
19th Jun 2021 09:57

Me too. Spain has a way of determining a tax based on a measure of deemed income. It's not real income and the UK doesn't deem there to be income other than under its own tax rules (eg sometimes under BIK rules if property is held through a company). In short, Spanish tax rules don't give rise to income for UK tax purposes.

I wasn't saying I didn't agree the answers. But the assertion that any answer must be right because 3 Awebbers agree it, which seemed to be Matrix's logic, is patently nonsense. As has been demonstrated time and again.

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Replying to David Ex:
BirdnCo
By BirdnCo
19th Jun 2021 10:18

Thanks again all, but I and I also believe others do not take all replies as advise, just opinions. I believe nobody should take any of these answers as advice on here, but all opinions derogatory or otherwise should be respected…

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Replying to Tax Dragon:
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By zebaa
19th Jun 2021 12:05

Ah… that good old ‘implied’ terminology. What I took - implied - from Matrix’s comment was they because three esteemed members has answered in much the same vein, the answer given was LIKELY to be correct, as opposed to the certainty that Dragon thought implied. We all talk, phrase and imply slightly differently & as perhaps I’m being pedantic making this post, I’ll shut up now.

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Replying to zebaa:
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By Matrix
19th Jun 2021 14:03

I didn’t really get why the poster posted exactly the same question again after that many responses, that’s all. He has been gracious and others thinks it is justified so my knuckles have been duly rapped.

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BirdnCo
By BirdnCo
18th Jun 2021 21:26

Thanks all appreciate your replies

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