British homeowners in Spain win £2.6m tax payout

Non-residents who inherited Spanish property were overcharged inheritance tax, but EU courts have ruled that the money must be paid back – with interest.

Spanish authorities have refunded €3.3 million (£2.6 million) in taxes to British holiday homeowners who were overcharged inheritance tax…

The landmark case was brought by British expats who felt that they were forced to pay too much tax when inheriting a property in Spain. Barcelona law firm Spanish Legal Reclaims took on the case and won, and the lawyers say they are currently processing a further €7 million worth of claims from British property owners who believe they were unfairly charged.

If these cases are also won, it could open up a landslide of claimants. The law firm believes that as many as 100,000 property owners in Spain may have been overcharged inheritance tax (IHT), which could amount to as much as €300 million owed by the Spanish authorities.

And it is not just Spanish Legal Reclaims who are working with Brits to recoup money owed, with the Telegraph reporting that a handful of other law firms up and down the country have also been inundated with claims.

Spanish Legal Reclaims’ chief executive Luis Cuervo told the Telegraph: “Anyone who paid inheritance tax during the past five years can claim back all the tax that they paid – but doing so is a complex and daunting task.”

Spain increased the amount of tax owed by people who inherited property when an owner passed away and left the asset to a relative or friend. For many non-resident inheritors, the amount of IHT levied sometimes amounted to one-third of the property’s value, with those who inherited a home told that the full amount had to be paid within six months of inheritance.

For Spaniards, however, exemptions applied, with Spanish residents exempt from up to 99% of the tax. This discrepancy was ruled discriminatory in 2014 when the European Court of Justice declared that EU citizens living in a fellow EU country should not be subjected to such different tax rules.

The court ruled that any non-Spaniards charged higher rates of IHT should have the money repaid, and repaid with interest. The average amount owed to homeowners who were overcharged is about €30,000 per claimant, according to Spanish Legal Reclaims.

As ever with issues of such complex matters, repayments are not automatic, so Brits who have inherited property in Spain recently are urged to seek professional and independent legal advice in order to make a claim.