Can I offset losses from a bad Spanish property deal?

This loss is only offset able as a capital gains loss, so first you must make a capital gain profit and use this to offset the capital gain paying no capital gain. That's all you can do.

On the assumption you do not run a registered property company, I believe your accountant is absolutely correct but probably didn't explain it very well.

It seems you have made an attempt to purchase a property, which is classified as a "capital" item. When you sell that very same "capital" item at a later date you are entitled to offset all purchase as well as sale costs including legal costs agents fees, refurb costs, financial losses attributed to that "capital" item etc against any profits you make on that "capital" item.

I have recently sold one of my properties and done exactly this. The Inland Revenus have a lot of info on their website about this and if you still don't understand, ring them - they are incredibly helpful and explained exactly what I could offset, how and why. I tried first ringing an accountant but all he wanted to do was charge me a fortune for working it out without explaining how it worked. The info I needed & a simple formula was supplied completely free from the tax office and I even rang them back and went through my final figures with them to confirm I had it correct so know I have it spot on. A big thank you to that Tax Officer.

As you never actually bought that "capital" item you have nothing to offset the loss against. You cannot offset against other properties (again assuming you do not run a registered property business) as they are all stand-alone capital items personally owned by you and not lumped together as they would be were you to run a registered property business which is subject to business accounting rules, VAT & corporation tax on your profits/escalating property assets/stock etc.

I am not an accountant but have owned & run a number of small businesses throughout my working life. I hope my explanation helps you understand.

On the subject of Spanish Property, did you not have a bank bond or guarantee? I believe there may be a legal requirement for one on off-plan new builds and despite being initially fobbed off, my sister has just received a full refund (she had made two payments), from Polaris World. With many of the banks that were funding them now owning those larger bankrupt Spanish builders (they took the land/properties against debts and carried on selling), they have to pay up if the correct contract was initially drawn up and you are prepared to pursue it. It has cost around £17k in legal costs but they have a court hearing next month to reclaim all those expenses and interest, which the lawyer says they will win (as the deposit repayment was made in an attempt to stop the legal action before going to court - unfortunately too late for Polaris as the case was already lodged), is acknowledgement that they were at fault, so they will not lose a penny in the end. It's taken around three years but was eventually well worth the effort. Obviously you must seek your own professional advise before you do anything as I am not a lawyer and don't know the full ins & outs.

I suggest anyone in this situation has a check of their contract and if a bond was required as part of the contract and/or issued on the initial deposit they should consider legal action, but track down a good Spanish lawyer with a history of wins.

The Spanish try to dissuade people from suing by frightening them it will cost a fortune and there is no chance of winning so they will walk away but it is rubbish as my sister has proven. Of course, many people unfortunately don't have the resources to take the correct action as the lawyers in Spain won't do anything withpout payment up-front and let's be honest, £17k is a lot to find, but £50k is also a lot to lose......

All the best

R

@RO1 - first, may I say what an excellent and very informative post.

With regards to accountants, I have met two types in my business life. Most accountants do exactly what you have described, they simply charge a fortune to work out the tax liability on a historic event. I agree that you are far better off talking to HMRC directly as opposed to dealing with accountants like this. However, I do appreciate that some people find figures and the prospect of talking to HMRC intimidating and that's why the type of accountants described above manage to stay in business.

The other type of accountant is a very rare species. They are creative and take a view of a problem from a much wider perspective. For example, my accountants recommended I invest into a Film Partnership years ago, the result of which is that my tax burden was spread over 15 years. I had no interest in investing into films whatsoever so would never of thought of asking an accountant or HMRC about the scheme. That's just one example, I have several others.

Now I'm not saying that there is a solution to the problem highlighted above, to be honest I have not got a clue. However, I can introduce people to my accountants/tax-advisers and hand on heart, I really do rate them very highly. Please see >>> http://www.property118.com/index.php/landlord-tax/

God this really does worry me hearing this sort of thing. Me and my wife invested here in a new build several years ago and though our property has gone down in value we always planned it to be a long term purchase as we want to live here for a number of years to come.

From my knowledge I believe your accountant is correct, as property maverick said it is only offset as a capital gains loss.

Best of luck with it though, I really hope you see some money back.

From 22/4/9 If you have income from furnished holiday accommodation in a European Economic Area (EEA) country, you can enter the details on the UK furnished property pages, see page FN12 of HMRC's SA106 Notes or press F1 for more information. http://www.hmrc.gov.uk/worksheets/sa106-notes.pdf