This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Rental properties in Italy

Enkei
Posts:5
Joined:Mon Jul 30, 2018 7:52 pm
Rental properties in Italy

Postby Enkei » Mon Jul 30, 2018 8:03 pm

Hi , I wonder if anyone could help...
I am a dual citizen Italian/British, have lived in UK since 1996 and inherited some properties following my mother's death in 1995. I own a portion of those properties (1/4) as I had to share with my siblings and father. He has been since managing the properties as he did before my mother's death: finding tenants, collecting rents, organising repairs and filing tax returns in Italy for everyone that needed it (one of my bothers also lives abroad). The rental income and tax is calculated according to Italian tax law and that is also paid for me by my father. I do not get any income from those properties neither in Italy nor in the UK. Should I include them in my tax return? If so I guess I could deduct the tax paid in Italy but what about the rest? Should I pay any tax on an income I do not get? Essentially my father 'manages' the properties on my behalf. Any suggestions welcome. thanks.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Rental properties in Italy

Postby pawncob » Thu Aug 02, 2018 4:26 pm

Why don't you get any income? Is it kept in Italy?
If it's your income you should include it in your UK tax return, even if it isn't paid to you. (and claim double tax relief if appropriate)
With a pinch of salt take what I say, but don't exceed your RDA

Enkei
Posts:5
Joined:Mon Jul 30, 2018 7:52 pm

Re: Rental properties in Italy

Postby Enkei » Tue Aug 14, 2018 10:04 pm

yes, the income generated from the properties stays in Italy in my father's accounts. As part of this agreement he manages the properties and retains the totality of the income generated. My father submits tax returns in Italy in my name for my part of the income but should I do the same in the UK (and claim double tax relief) even though I do not receive any of that income (as I use it to 'pay' my father's services)? Thank you.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Rental properties in Italy

Postby pawncob » Wed Aug 15, 2018 10:31 am

It's open to debate whether you are paying for your father's services or making a gift to him. In any event you should declare your share of the income on your UK return.
With a pinch of salt take what I say, but don't exceed your RDA

Enkei
Posts:5
Joined:Mon Jul 30, 2018 7:52 pm

Re: Rental properties in Italy

Postby Enkei » Tue Sep 04, 2018 11:56 am

Thank you for your reply.
I guess my point is that I do not receive any income because of the management service I have decided to use (as clearly I cannot manage the properties from here) and that is the reason for not declaring any income.
I only partially get the argument around the gift: if a plumber fixes a washing machine in one of the properties he will get paid and I will get a receipt. The same goes for the services I get from my father. Is the problem the fact we are related? Fiscally we are not related, we even reside in different countries. So if I paid an agency all would be ok?

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Rental properties in Italy

Postby pawncob » Tue Sep 04, 2018 12:22 pm

If you owned property abroad with an income of £50,000 and expenses of £50,001 you'd still have to make a return.
With a pinch of salt take what I say, but don't exceed your RDA

Enkei
Posts:5
Joined:Mon Jul 30, 2018 7:52 pm

Re: Rental properties in Italy

Postby Enkei » Tue Sep 04, 2018 12:32 pm

granted. that was a mistake. what is more interesting (and relevant for me as I understand fines are based on the amount of tax payable) is the argument about the services provided by my father. As you say that is an 'open debate' so the only option is to take it to HMRC and get their view...

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: Rental properties in Italy

Postby AGoodman » Thu Sep 06, 2018 11:11 am

HMRC could see it as a gift because you appear to be paying far over the commercial rate. They would think the same of the plumber if you paid him 2-4x the going rate.

Enkei
Posts:5
Joined:Mon Jul 30, 2018 7:52 pm

Re: Rental properties in Italy

Postby Enkei » Thu Sep 06, 2018 6:39 pm

Fair point. it would probably be safer to claim a "reasonable" market rate for that service. thank you.


Return to “International Tax”