Neighbour has rented out our property abroad without permission!

But she needs to understand the seriousness of the tax situation, because that is a can of worms she might be about to open by getting lawyers involved.

And, y'know, there's the moral issue of the unpaid tax as well as the legal side.

@BMW6 And yes, I realise that if he was investigated he would need to prove all that, but under the cirumstances it doesn't seem like an enormous concern. Realistically, what would happen if you called HMRC and say "4 years ago I was given £750 cash in hand in Spain for a couple of informal weekend rentals of a flat there. That year I also spent £900 on the building/service charge, and £600 on maintenance, as well as £500 on insurance, cleaning and commission to the guy who organised the rentals. How can I submit a tax return for all that?"

Why is the neighbour pretending it's his property if he has your Dad's permission to rent it out?

To be fair, the original cash-in-hand rental income sounds like it was probably only a few hundred, maybe a couple of thousand tops, and quite likely less than the service charge/maintenance costs on the property, so probably no tax liability.

Now that the rental income is presumably much higher since the neighbour has started renting out the flat year round, OP's father hasn't known about or received any of it, so again - no tax liability!

Change the locks is the cancel the cheque of 2024.

Wait… you dad has received at least some income from this arrangement? But your dad hasn’t organised insurance, doesn’t pay tax?

You made it sound like the neighbour was up to no good on his own, but you dad is just as complicit. Nothing has been done properly, and they’ve both made money out of this.

Really, it’s your dad’s fault for starting this. And the neighbour has clearly just ran with it thinking he’d get away with skimming extra and renting longer.

I think you need to let it go tbh. If you can get these tenants out then that’s great but if not, let their rental finish but have them switch the rental payments to your dad (and he needs to sort insurance) and then end the relationship with the neighbour. And make sure your dad doesn’t do anything like this again.

Id get a local solicitor involved and change the locks asap

^This^

No, OP has said her Dad would get bundles of cash periodically and he knew the property was being let to others, but not the extent.

He just wasn't getting his full cut.

OK.
Meanwhile, I am trying to give OP relevant advice about a neighbour illegally and untraceably renting or lending out her fathers flat. For cash.

She does not need other scenarios. There is a pressing one.

No, but I do have 34 years experience with HMRC , 15 of which were with Compliance undertaking investigations into non Compliance.

You may have missed the point - I'm not talking about Spanish Tax Legislation.

Her Father has very very likely Evaded UK Tax.
Which is a criminal offence actually.

OP said that it was ok for the neighbour 's family to stay there when visiting so no money would have been paid as it wasn't an Air bnb set up. It was just a favour for keeping an eye on the property. The neighbour has gone one step further without her father's knowledge.

It is not a legal scenario.
It is cash under the table.
The worry is getting the people out.
Not tax.

I take it you have lived worked rented bought and sold property in Spain and live here now.

It all sounds like a bit of a mess. To rent your holiday property in Spain you need a touristic licence granted, presuming your dad hasnt got one of these. Getting a lawyer may be the only option, it could also open a massive can of worms up for your dad.

Hope he gets it sorted.

I take it you have years of experience as an HMRC Compliance Inspector?

I beg your pardon? I really, really do.

You have no idea.

They were banked? By whom? 4 years ago?

I doubt it. Whole point of the cash transaction.

What an absolute shit show.

They might own the title, but it sounds like its also someone else's home as in, the place they live day to day, sleep, eat and generally have their lives. That counts too.

I'm afraid you're quite wrong.

If HMRC gets ANY information to indicate the property has been available for letting and they open am investigation the onus will be on the legal owner to prove that he didn't receive any

Which he has. Bundles of cash periodically. Which has been banked (easy win for HMRC) or spent (Bank accounts would all be analysed to prove cash shortfall).

Once we get hold of all the bank statements from all his accounts it's not rocket science to prove potential undeclared income.

I totally disagree. It is not my current experience at at all. The neighbour knows it too. I have lived here 18 years. I rent/have rented and have bought.

If the neighbour wants to do this on the sly with a sick ex pat, there are SO many ways to do it.

I have quite a bit of experience of the Spanish rental shitshow system.
I really do hate to be the bearer of bad news but you may have a fight on your hands; not so much with the neighbour who can be dealt with legally but potentially with the tenants and Hacienda.
In this situation I would try to get the tenants on side as much as you can because they potentially could be the major sticking point here.

You say the current tenants have “long term” term agreement until January. Do you know when their agreement started? Time is of the essence here. If they can prove that they have been paying and when they have been there more than 11 months they have the legal right to stay for 5 years on the existing agreement (rent can be increased by only 2%)
Threats to disconnect utilities are illegal.

If less than 11 months the tenant can give notice but the “landlord”(who this actually is in this case is very grey ) has little power.

The contract doesn’t necessarily have to be in writing, Spanish law allows the parties involved to choose.
As a result, it may be oral or written, but the parties must be able to prove it exists and that it includes the essential conditions for its validity.

For a short term let which it would seem this is SO FAR, there should be a tourist license in place and tax to pay. So again, keeping this “quiet” and trying to keep the tenants onside is the best course of action.

I think I’d plan a visit and accept that you may have to rent accommodation elsewhere on this occasion to get this sorted with as least fuss as possible and cut your losses because you really don’t want to make a monster out of it.

On a positive note, your Dad is on the mend and fit to travel which is massive after a stroke so feel very blessed that this can happen and try to move on.
Good luck 💐

@AdriftAbroad1 this is such an outdated view; licensing, taxation etc etc are very much enforced in many parts of Spain now. Rental laws are complex. Much better to get legal support now then risk losing the property; backdating taxes etc will be a small amount in comparison (if it comes to that). And yes the OP’s father should have been paying annual local and non local taxes every year even without an income in Spain. We all have to. The OP needs to sort this all out and not listen to the advice to hide from it. - all of this will come out if the property is ever sold and any withholding tax from the sale value will be automatically retained by the state until the seller can prove all taxes over th years have been paid etc etc.