Changes to the reporting of letting income

Share experience regarding ownership of property and/or living in Portugal.
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shanagarry
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Re: Changes to the reporting of letting income

Post by shanagarry »

Understood - keep well my friend :D
LICY
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Re: Changes to the reporting of letting income

Post by LICY »

Totally agree with Widge's comments. We had an invoice book produced in Lagoa. You provide original to holiday maker, duplicate to accountant. We get paid in £'s and convert to €''s. We include 6% IVA within the figure we charge the guests. We have to enter their name and address. It has to be submitted every quarter. However you are allowed 6 weeks grace after the end of the quarter. I have noticed at the end of the month we receive an automatic message thanking us for our receipts, even though it's our accountant who sorts it for us. All that has been said about IVA at over10K is how I understand it. you don't need to rent your 2+ bedroom villa many weeks to get that. So far as I am aware all IVA is allowable, but as Widge said you need receipts. Our Makro card is in my name which was rejected as the accounts are only in hubby's name. In theory cleaning material, repairs, building etc is also part of the IVA return. Basically anything that you can prove you paid IVA on. Hubby is not convinced we get the whole 23% back, but I hope so. It's sounds simple but I am still getting used to it. At the end of the financial year we then pay 15% tax. Oh dear, need to start saving. There are lots of the bigger bills that at not deducted as they would be in the UK, such as maid, electric, mortgage and so on, hence 15% tax not 40%+. Hubby then has to pay the UK Tax man what ever he asks for if we did not pay the Portuguese tax to the same level as UK tax. Sorry badly worded. If we pay €1000 to Portugal, it may have had to pay £1200 in the UK so have to pay another £200 (ish). If you are legal don't expect to make big profits, albeit we have yet to work it out. My plan is it pays for me to have free accommodation that is a bonus.
Geoff
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Re: Changes to the reporting of letting income

Post by Geoff »

It has to be submitted every quarter.
Is that purely the IVA aspect?.....I had heard that the income declaration needs to be monthly, not yearly, which sounds unnecessarily cumbersome....
widge
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Re: Changes to the reporting of letting income

Post by widge »

The tax & social security authorities seem to be getting very aggressive.

I received a tax demand in September 2014 for year ending December 2013 which I believed to be incorrect as it ignored the fact that I had registered as a business and taxed me under the old rules at 25% of income less a few allowable deductions for expenses.

I appealed and the local tax office rejected my appeal last week and then fined me interest for late payment! My accountant is appealing again as he feels that the local tax office has misinterpreted the law. In the meantime, like several others I know, we have been forced to handover the tax and await a credit.

I have also been fined for being a day late in declaring the maid's salary in November 2013 ! So 1 year later I get a fine of €37.50 this is more than the amount I owed.

Has anybody else had a similar experience ?
Mexican Pete
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Re: Changes to the reporting of letting income

Post by Mexican Pete »

For perfectly good and valid reasons, we hold our property through a UK company that is the registered owner of the house. Our accountant tells us that because the house is held in this way we are not eligible for the "Simplified Regime" and will continue to be taxed at 25%, less minimal allowable expenses . Is there anyone else in the same position who has been told the same? Seems wholly inequitable to me – but then why should I be surprised!

Mexican Pete
LICY
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Re: Changes to the reporting of letting income

Post by LICY »

Reading all this will probably mean those illegal lettings will remain illegal in the hope they are not the one that is caught. They really need to be encouraging them to do the right thing which we are,but I am feeling anxious. Buggered if you do, buggered if you don't syndrome. Our accountant obviously has to confirm our income, not just the IVA,mind you it's one and same as it's on the rental invoice. We had no IVA to pay this quarter, over and above our general bills. Indeed over the next 6 months they will owe us. Hope they refund us, but it will not hold my breath. :roll:
biffa
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Re: Changes to the reporting of letting income

Post by biffa »

There is a reasonably simple approach to Mexican Petes corporate holding problem in fact.

The company executes an agreement with the Mexican under which he is entitled to enjoy and explore the property including letting and retaining and reporting the income. In fact ideally a UK property holding company would be set up as a nominee or bare trustee to avoid full UK accounts and thus income would be attributed to the shareholder in any event.

Then Mexican can report in his own name under Category B simplifed regime. Of course he may have reporting obligations in Mexico or wherever Sr Pete is tax resident!
RichardHenshall
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Re: Changes to the reporting of letting income

Post by RichardHenshall »

biffa wrote:... The company executes an agreement with the Mexican under which he is entitled to enjoy and explore the property including letting and retaining and reporting the income. ...
Wouldn't the UK company or Mexican Pete get clobbered under HMRC's benefits in kind rules, assuming that the UK company is his?
joeysoap
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Re: Changes to the reporting of letting income

Post by joeysoap »

LICY wrote: Hubby then has to pay the UK Tax man what ever he asks for if we did not pay the Portuguese tax to the same level as UK tax. Sorry badly worded. If we pay €1000 to Portugal, it may have had to pay £1200 in the UK so have to pay another £200 (ish). If you are legal don't expect to make big profits, albeit we have yet to work it out. My plan is it pays for me to have free accommodation that is a bonus.
Does it not all boil down to this in the end for the majority ie the less tax you pay in Portugal the more you pay at home ?
Mexican Pete
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Re: Changes to the reporting of letting income

Post by Mexican Pete »

Many thanks Biffa, I'l pursue that suggestion!
RichardHenshall wrote:Wouldn't the UK company or Mexican Pete get clobbered under HMRC's benefits in kind rules, assuming that the UK company is his?
My understanding is that Gordon Brown resolved this issue while he was still Chancellor and the "benefit in kind rules" no longer apply in this situation. - About the only thing he ever did to my advantage!

Mexican Pete
steveh
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Re: Changes to the reporting of letting income

Post by steveh »

Could I ask another question about this approaching change? We understand from our property manager that invoices will have to be issued for each paying guest (ie group/family). For a few years now, we've arranged all our own bookings which have largely come from the UK with money in GBP, although we get the odd booking from the eurozone. We're told the invoices now have be prepared with "proper, certified software using the SAFT system" (whatever that is!) and that while our property management company can do that for us for bookings generated by them, we haven't used them as agents for a long time (we just weren't getting anywhere near enough bookings) and they're not sure they can issue these official invoices on our behalf for bookings they haven't generated. As we don't have any kind of official software to prepare invoices, will this mean we can no longer take bookings in the UK ourselves and will have to rely on whatever our management company can generate?
e-richard
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Re: Changes to the reporting of letting income

Post by e-richard »

You can continue to take bookings yourself, but someone (for example your agent) needs to file the invoices for you using this amazingly expensive and complicated software that seems to cost an arm and a leg. Well, I assume its expensive based on the fees being charged. I have two quotes, one for nearly €600, one for €900 and I've seen figures of €1200 per annum mentioned - all plus 23% IVA !

As far as I can tell, each invoice (Factura) will take about 2-4 minutes to generate on a computer, then a couple of clicks to send to the tax office and that is it. Job Done.
You know how many rentals per annum you have, so do the math and see how much it costs to generate each invoice !
The savings in Tax to you are indeed enormous, and so the accountants have spotted a market opportunity to take the lamb's wool :cry:
sunman
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Re: Changes to the reporting of letting income

Post by sunman »

well, this should all do wonders for our property market :roll: :(
RichardHenshall
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Re: Changes to the reporting of letting income

Post by RichardHenshall »

steveh wrote:... We're told the invoices now have be prepared with "proper, certified software using the SAFT system" (whatever that is!) [...] As we don't have any kind of official software to prepare invoices, will this mean we can no longer take bookings in the UK ourselves and will have to rely on whatever our management company can generate?
Can the sales not be reported on the Portal das Finanças using one of the options to report Recibos Verdes Eletrónicos (Faturas-Recibo) without needing fancy software?
Geoff
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Re: Changes to the reporting of letting income

Post by Geoff »

It may have been mentioned above, but I understand that if (rental) income is <€10k, then reporting only needs to be annual , which sounds a lot simpler.

Apparently, if a UK pensioner, one needs to submit some proof that one doesn't need to pay UK NI/Social Security ( otherwise the entrepreneur needs to pay Portuguese Social Security ).....am not sure what form this needs to take, but apparently you have a year to get it!

But, at the end of the day, what the Portuguese tax man giveth, the UK taxman will take away.....so the net loss will be the accountants' fees ( at least, UK tax deductable!).
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