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Valuation of Spanish property for UK Inheritance Tax purposes

If you are dealing with the transfer of a deceased UK resident’s Spanish assets into the name of those inheriting the assets, the process may involve the completion of inheritance tax returns in the UK as well as in Spain. Both returns require property valuations for inheritance tax purposes and the two countries involved take different approaches.

If the deceased’s UK estate is liable to UK inheritance tax, then HM Revenue & Customs (HMRC) Form IHT400 and accompanying Schedules including Form IHT417 will need to be completed and submitted together with supporting evidence of the ‘open market value’ of the Spanish property at date of death. In certain circumstances, Form IHT205 may be completed instead of the IHT400 for which a verbal valuation of the property would be enough. Valuations usually take a week or two to arrange, and those responsible for administering an Anglo-Spanish estate should establish Spanish asset valuations in time to comply with any deadline for reporting to HMRC.

When deciding who is best positioned to value the Spanish property, there are several options.

If a valuation is all that is required, the least expensive option is to ask a local estate agent to value the property. Some agents will value the property free of charge on the understanding that the business goes their way when the time comes to sell. Others might typically charge €250 to €350 including local VAT. There will be suitable English-speaking estate agents in the areas most popular with British owners. Contacting the estate agents directly will be the most cost-effective option if you have the time on your hands.

If you know, or suspect, there are structural or legal issues that may need regularising, then you will need more expert help. Spanish based surveyors with a RICS (Royal Institute of Chartered Surveyors) qualification or Spanish Arquitectos Técnicos (specialist architects) can tackle these issues whilst valuing the property.

If the property is in an area popular with British owners, then RICS surveyors should be your first port of call. RICS surveyors will be either English ex-pats or Spanish professionals with the skills to produce their reports in language you will understand. Their fees will usually be around €1000 to €1200, including Spanish VAT for a formal valuation and survey.

The alternative is to instruct a specialist architect. Their fees may be half those of a RICS surveyor but, if you add the usual costs of arranging and interpreting their reports, then it will usually be quicker and more cost-effective to hire a RICS surveyor. In more remote areas of Spain, with less RICS coverage, contracting a local technical architect may be the more viable alternative.

A walk-by inspection may be sufficient for a simple valuation but, in most cases, the professionals are likely to want someone local to arrange access and accompany them on their visit.

Although HMRC require an open market valuation, the Spanish Tax Office calculate Spanish Inheritance Tax with reference to an official date of death value based on the rateable value of the property. When, as is more typical, the official value at date of death for Spanish purposes is lower than the open market value, the latter should still be used for reporting to HMRC. Special consideration will need to be given by HMRC to occasional cases when the official value for Spanish purposes is higher than the open market value.

If you would like more help with Spanish property valuations, please speak to Dennis Phillips or another member of our Spanish team on 01733 888888.