Am I tax resident in Spain?

Case Study Spanish Tax Resident Couple

Husband 60, wife 60, married, with 2 children who are financially independent and living in the UK

👉 Pensions: £930k
👉 Investments £60k
👉 Cash Spain €60k
👉 House €1.25 M
👉 Wills – UK & Spain
👉 Cash UK £184k

Challenges

Build Understanding of Pension Situation

• Pensions will break UK Lifetime Allowance Rule even as Spanish Resident
• Difficulty estimating pension as coming from four different pension schemes
• When can I retire
• No overall investment strategy for pensions
• How to minimize tax on pensions

Better returns on Non Pension monies

• Bank accounts earning only 0.15%

Forward Planning including Inheritance tax

• Would Mrs X have enough to maintain property if current pensions provided only 50% pension on husband’s death?
• What would be the Spanish Inheritance tax if one partner died?
• How would this Inheritance tax be paid?
• How is inheritance tax applied in Spain and UK?
• How can the UK and Spanish inheritance tax liability be managed?

What we did

1. Completed a full financial review of present financial standing
2. Undertook a cash flow forecast to establish if widow’s pension was sufficient, how to pay inheritance tax on first death and how long their money will last
3. Provided a Transfer Value Analysis report by our qualified pension expert – a Fellow of the Chartered Insurance Institute
4. As a pension was a defined benefit pension, a secondary full report provided by a FCA regulated adviser with full UK pensions permissions in line with UK, FCA rules
5. Consolidated pensions to improve tax efficiency, improve widow’s pension and manage in line with their other assets
6. Built investment strategy to improve return on their investments and cash
7. Clarified how inheritance tax works in Spain and UK and gave an estimate of tax due
8. Built an inheritance tax strategy, including sufficient money available to pay tax in Spain on first death
9. Minimised Spanish Tax paperwork and liaised with Spanish Tax adviser
10. Produced Family inheritance tax strategy document so whole family knew the strategy without disclosing amounts held by the parents
11. Wrote to UK HMRC for confirmation that the family home in Spain will qualify for the Main Residence Nil Rate Band
12. Identified a UK inheritance Tax saving on a UK life assurance policy
13. Carried out regular reviews over 6 years (so far) to update investment and inheritance tax strategies and to adapt to changes to the law

The RESULTS

✅ Clarity for clients and children on Inheritance Tax
✅ Improved return on bank accounts to 3.5% pa giving an improvement of 4,200 pa
✅ Removed pensions from UK Lifetime Allowance rules
✅ By providing documentary evidence from UK HMRC for Main Residence Nil Rate Band confirmed an inheritance tax saving of up to £140,000
✅ Improved widows pension by £7,000 pa
✅ Kept clients compliant with changing tax rules
✅ Answered the financial question “Am I going to be OK?” with a “Yes”

If you are a resident in Spain, or are planning to become a resident and would like any information on tax, pension transfers, investment planning or general financial planning you can contact me on:
barry.davys@spectrum-ifa.com or direct on 0034 645 257 525