Spanish inheritance - any UK tax liability?
Posted: Tue May 15, 2018 3:07 pm
We are trying to deal with my mother's estate in Spain, the UK estate was all in joint names and passes to my father outside of the will but I need some clarification on possible tax issues from the Spanish assets.
My father is a Spanish national UK resident, taxpayer and now retired in the UK (as was my mother). Unfortunately, through an error, the only valid will was a Spanish will which due to forced heir laws in Spain lists my brother and I (UK nationals resident in the UK and UK tax payers) as heirs. We plan to reject the inheritance and therefore my father will be next in line to inherit. The questions revolve around the manner in which this rejection is done. The estate comprises of 50% of a flat bought about 38 years ago which is in joint names (no transfer by survivorship in Spain), a couple of joint bank accounts (again no transfer by survivorship) and some land in my mother's sole name. We have two options:
1 We reject outright any right to the inheritance and we have to go through an intestacy declaration to determine who the lawful heirs are - in our case it will be my father and the inheritance will go directly to him.
2. We reject the inheritance in favour of my father but in order to do that we have to technically accept the inheritance in order to be able to gift it to my father thereby avoiding the intestacy process in 1 above.
Option 1 - I don't think there is any UK tax implication where the inheritance is concerned as my mother's entire estate in the UK and Spain is below £325,000 and we will pay the necessary Spanish inheritance and other local taxes in Spain. My main area of concern is that my father would like to sell the flat and the land as soon as the inheritance is settled. Capital gains will be charged in Spain at I believe 19% and a withholding tax of 3% will also be charged. Would he also have to pay capital gains tax in the UK on this sale?
This option has more cost upfront sorting the inheritance out but if it keeps the tax situation simple it might be worth proceeding in this manner.
Option 2 - If we gift the inheritance to my father the value of the gift will be about £25,000 each to my father. The only issue for my brother and I would be in terms of own estates if we die within 7 years of making the gifts. What, if any, tax implications are there for my father firstly in accepting this gift of 50% of a flat, some land and some money and then selling the flat and land?
I hope I have been clear and that someone can clarify the situation for me.
My father is a Spanish national UK resident, taxpayer and now retired in the UK (as was my mother). Unfortunately, through an error, the only valid will was a Spanish will which due to forced heir laws in Spain lists my brother and I (UK nationals resident in the UK and UK tax payers) as heirs. We plan to reject the inheritance and therefore my father will be next in line to inherit. The questions revolve around the manner in which this rejection is done. The estate comprises of 50% of a flat bought about 38 years ago which is in joint names (no transfer by survivorship in Spain), a couple of joint bank accounts (again no transfer by survivorship) and some land in my mother's sole name. We have two options:
1 We reject outright any right to the inheritance and we have to go through an intestacy declaration to determine who the lawful heirs are - in our case it will be my father and the inheritance will go directly to him.
2. We reject the inheritance in favour of my father but in order to do that we have to technically accept the inheritance in order to be able to gift it to my father thereby avoiding the intestacy process in 1 above.
Option 1 - I don't think there is any UK tax implication where the inheritance is concerned as my mother's entire estate in the UK and Spain is below £325,000 and we will pay the necessary Spanish inheritance and other local taxes in Spain. My main area of concern is that my father would like to sell the flat and the land as soon as the inheritance is settled. Capital gains will be charged in Spain at I believe 19% and a withholding tax of 3% will also be charged. Would he also have to pay capital gains tax in the UK on this sale?
This option has more cost upfront sorting the inheritance out but if it keeps the tax situation simple it might be worth proceeding in this manner.
Option 2 - If we gift the inheritance to my father the value of the gift will be about £25,000 each to my father. The only issue for my brother and I would be in terms of own estates if we die within 7 years of making the gifts. What, if any, tax implications are there for my father firstly in accepting this gift of 50% of a flat, some land and some money and then selling the flat and land?
I hope I have been clear and that someone can clarify the situation for me.