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Thread: Tax Payable On Balearic Property Inherited By UK Adult Children Via Spanish Will

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  1. #1
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    Feb 2018
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    Default Tax Payable On Balearic Property Inherited By UK Adult Children Via Spanish Will

    I'm just wondering if any well known expert in this forum can offer advice on the inheritance tax situation of a property in the Balearics that I and my sister have inherited from our mother following her recent death.

    My mother, I and my sister are all UK residents but my mother and late father both made mirror Spanish wills when they purchased the property in question (an apartment in a Spanish Community) leaving all their property in Spain first to the surviving spouse and then on the death of both partners to their children (myself and my sister who are both adults).

    As I possibly understand the current situation there is currently no Inheritance Tax on property transfers between parents and their children in the Balearics on death (but is this true of adult children too?) and following various court cases this exemption has now been proven as also applying to a Spanish property owner and/or their children who are also nationals of any other EU member state. Thus despite the UK's current process of leaving the EU it was still a full member when my mother died and hence the same rules apply to inheritance from my mother to I and my sister as to Spanish citizens owning property in the Balearics? This seems to imply that possibly no inheritance tax is payable at this time in Spain as and when the property is transferred in to the name of myself and my sister? However at the same time and within 6 months of my mother's death the Executors of my mother's estate must file a tax return with the UK tax authorities (HMRC) and pay any relevant Inheritance Tax and also apply for Probate in the UK.

    So my question is if my sister and I simply inherit and take over co-ownership of the property in Spain is this declarable as part of my mother's taxable estate on death for Inheritance Tax with HMRC in the UK or not? We also seem to have heard that if I and my sister simply take over ownership and do not sell the property and continue to own it for a certain number of years that no Inheritance tax is payable (in the UK that is as it seems to definitely not be payable in the Balearics) but if we were to sell it immediately to distribute the proceeds of it between myself and my sister as part of my mother's distributable estate following death then it would become part of my mother's UK estate and so be liable for either Spanish and/or UK Inheritance Tax?

    We have informally consulted a firm of Spanish notaries with a London office, who assisted previously when my father died much longer ago but now no longer do work directly in this area, and they seem to say that as long as my late mother had a Spanish will governing her property in Spain that they believe we are not liable to Inheritance Tax. But are they only referring to the Spanish authorities and is there in fact an Inheritance Tax liability to the UK authorities because the Spanish property is ultimately a part of my mother's estate upon her death?

    We have also already talked to a number of UK inheritance tax and probate specialists and none of them seem to be immediately clear on the answer to this particular question. So any advice from members of this forum who know both Spanish inheritance tax (including the IHT situation on property in the Balearics) and UK inheritance tax laws would certainly be appreciated. I also understand that the basic issue behind all this is that there is no Double Tax Treaty between the UK and Spain in relation to assets owned in one country by a resident of the other country but I still can't quite work out the practical taxation implications that this entails.

    In any event the advice of anyone who is expert in this area and has a view on this matter would certainly be very much appreciated.
    Last edited by Capvermell; 02-06-2018 at 06:10 AM.

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