Viewing posts categorised under: Spain

TAXATION UPDATE IN SPAIN

By Charles Hutchinson
This article is published on: 16th January 2020

16.01.20

We now have a new government here in Spain, albeit quite far to the left which could cause some more interesting changes in taxation. Watch this space.

WEALTH TAX
So far, the reinstatement of the 100% allowance for Wealth Tax (which was approved in 2011) has been delayed again for one more year as part of the 2018 budget extension, due to the recent era of no federal government being in place. Nor has the Junta de Andalucia made any moves to reinstate the allowance in the 2020 budget either.

MODEL 720 DECLARATION OF FOREIGN ASSETS
On the 23rd October 2019, the EU Commission filed a complaint in the European Court of Justice to the effect that Spain has not complied with the Commission’s findings in November 2015 namely that Modelo 720 deters businesses and private individuals from investing or moving across borders in the Single Market. Also these provisions are in conflict with the fundamental freedoms in the EU; this conflict affects free movements of persons, free movement of workers, freedom of establishment, freedom to provide services and the free movement of capital.

Furthermore, the Commission has claimed that by introducing late filing penalties and the labeling of these foreign assets as unjustified capital gains (which are not subject to the statute of limitations), it has breached EU law. Additionally, whatever the amounts involved, they are all subject to tax at the top marginal rate (45% in 2012) plus a fixed penalty of 150% in addition to the tax and further fixed penalties for failure to file, which are higher than the general rules on similar infringements. Spain, therefore, is liable to comply with EU law and to pay costs.

Although precedence does not exist in Roman law, a precedent was set in 2011 when the EU successfully prosecuted Spain over discriminatory Inheritance and Gift Tax rules. This ended with a Court resolution in 2014 that led to an amendment in Spanish Law and opened the door for reclaims of taxes paid over the previous 4 years.

The issue of the Declaration continues to be of great concern to many people in Spain, particularly the expatriate community. Some of the most vulnerable assets are foreign bank accounts. These can be easily switched into other foreign assets where reporting under Modelo 720 is not required and the taxation of income from them (if taken) is greatly reduced.

If you have concerns in this area, please contact me where I can assist you with the problem.

Source: JC&A Abagados, Marbella

Financial Planning for Business Owners in Barcelona

By Barry Davys
This article is published on: 8th January 2020

08.01.20

This is the first in a series of three articles on the challenges of financial planning in your personal life when you own a business or are a significant shareholder in a business. This first article is planning when starting a business. The next article covers planning when you have an established business. The final article, the one we all want, goes through what happens when you sell the business and find yourself cash rich.

When starting a business, it is the business that gets the attention and often your personal, non-business, financial position is left unplanned. I would recommend at this stage you do prioritise the business as if it goes well, your business is likely to be the driver of your wealth. It should certainly grow your wealth quicker than investing in funds, shares, etc. It will probably make you wealthier than investing in Bitcoin!

Making your business the priority, however, does not mean that you can completely ignore your personal finances or manage them on a “when I get round to it” basis. Owning a business means it is very important to do your own personal planning because success can ebb and flow and, especially for a new business, it can go bust. Making sure your own affairs are in order protects your family and may even allow you to start up again, if arranged properly.

I recognise that different companies have different characteristics and that this can affect your planning. I also recognise that owners of businesses in Barcelona should base their planning specifically on Catalan laws and taxes.

Planning your personal finances when starting a business

Product – tick. Business plan – tick. Website – tick. Instagram – tick. Business partner – tick. Financing – tick. So the business is good to go and will, of course, be a success.

I wish all of you who are starting a business the very best of luck. It can be a most rewarding experience, even though it can also be exhausting and stressful. However, the data shows us that whilst 80% of new businesses survive one year, only 30% make it past the 10 year point¹. This statistic shows you why your personal finances will continue to need your attention.

Planning points:
1. Recognise that personal money differs from business money. Keep it separate!
2. Get your affairs in order before starting your business. If you have children, make sure you have life cover. Get private medical insurance so you can be seen quickly and get back to work as soon as possible.
3. Know what your personal expenses are before you start the business. This can help you decide how much to take from your business each month. Do not start your business and then take only what you think the business can afford. This will push you into debt personally.
4. Conversely, when business is going well, don’t buy flash cars, boats, luxury holidays etc. until you have sold your business or unless you are Bill Gates, Elon Musk etc. and your company is doing remarkably well.
5. Keep an emergency fund in your personal finances of at least 6 months’ expenses in case there is a business “wobble”.
6. When getting equipment and vehicles for your business do not buy them in the early days of the business, especially if you have to put personal money into the business to make the purchase. Your financial risk is minimised if you rent or lease equipment. We can also now get cars on a “subscription” basis. This means that instead of buying or leasing you pay a fixed monthly fee for the use of a car. This is like renting a car from Avis but you rent it from the car company. If you need to walk away after six months, you can do so with no liability. This is available from several car companies in Spain.
7. Keep flexibility in your personal finances. Do not, for example, put money into pensions in the early days of your business unless you have additional reserves. We cannot access money invested in a pension until you approach retirement.
8. This may mean that you need to leave money in the bank. In Spain, that means we will earn, at the moment, virtually no interest. Accept that fact and make your money

¹Forbes, Fortunley and Business Wire. Statistics are USA statistics

So what is the outlook for 2020?

By John Hayward
This article is published on: 4th January 2020

04.01.20

How was 2019 for you? For many, it has been another year of uncertainty with an apparent lack of decision making by politicians which has led people to delay making their own decisions. For me, it was the year that I broke my ankle two days into a fortnight holiday. If only for that reason, it has not been my favourite year ever.

So what is the outlook for 2020? Questionable political leadership in the UK over the last 4 years has created a weak economic backdrop where investment firms have been unwilling to risk client money in the UK. That appears to be changing and, whether you agree or disagree with Brexit, certainty creates confidence. A known is far easier to deal with than an unknown.

The current problem is how exactly Brexit is going to go through and how long it will take. That is why top investment firms that we recommend spread their exposure globally and not just in the UK. Although most British people have been hung up about Brexit (me included), the rest of the world has been carrying on their business regardless, creating growth for our clients at a time when other people I have spoken to have been too scared to invest, waiting for that magic day when everything will be at its perfect investment point. This approach is almost guaranteed to fail, certainly in the long term. Taking a grip and making sensible, informed investment decisions now is vital without waiting for a politician to decide your short-term, and long-term, fate.

Since David Cameron announced in February 2016 that there would be a referendum on the UK’s membership of the EU, we have seen the following (to 31/12/19)*:

+12% – UK inflation
+49% – FTSE100
+30% – A low risk investment fund that we recommend for cautious investors
+4% – Average savings rate
-8% – GBP/EUR exchange rate

What these figures illustrate is that the person who invested, or remained invested, in February 2016, should now be pretty happy. Those who have decided to wait until they know what is happening are likely to have made nothing with their money remaining in a non-interest bearing current account. Their money is now worth 8% less when allowing for inflation. This “loss” is compounded for those living in Spain, receiving regular income from UK State and other pensions, by the fact that the exchange rate is down 8%.

How long do you, or can you, wait before arranging your finances for your benefit and not leaving your money propping up banks that still have issues? We have many satisfied clients who have benefited from our knowledge and expertise. In addition, with our experience of tax in Spain, we can help those living in Spain after Brexit, guiding clients who have UK investments and reducing the impact of the Modelo 720 asset declaration.

Whilst there is a new batch of uncertainty surrounding what Brexit deal will be put in place on 31st January 2020, and what trade agreements will be set up by 31st December 2020, there are positive signs for the coming year and the benefits of these can only be achieved if one is invested appropriately.

We can review your current investments, wherever they may be, and make sure that they are both profitable and tax efficient, both here in Spain and the UK.

*Sources
Hargreaves Lansdown
Financial Express
Swanlowpark

Spanish Succession and Gift Tax boost for non-EU beneficiaries

By John Hayward
This article is published on: 6th December 2019

06.12.19

Imagine that it is Saturday 1st February 2020. Britain has calmly left the European Union with trade deals in place with Australia, Canada, South Africa, the USA, China, Cuba, Afghanistan, Iraq, Iran, and Columbia (I did say imagine). It is possible that you have children who live in one of these countries and you are resident in Spain. 2 years ago your children would not have benefited from the European Court of Justice ruling (2014) which stated that children who live in an EU/EEA country should benefit from local Spanish rules and allowances when calculating Spanish Succession and Gift Tax. Since the decision in 2018 in favour of a Canadian (Canada is not due to join the EU), the Spanish Supreme Court have ruled that “connected” non-EU beneficiaries will also benefit from the rules of each Autonomous Region in Spain. What this means is that, even if there was a hard Brexit, your child in London would be treated as fairly as one in Valencia, Havana, or Beijing.

It is possible to reclaim overpaid Succession and Gift Tax. Please get in contact if you know anybody who has been a beneficiary of an inheritance using the allowances under the old rules. The claim could amount to many thousands of Euros.

Contact me for more information

Gifting your Spanish property can save tax

Investing some time in estate planning now will help to make certain that your wealth is distributed the way you want it to be and not end up in the taxman´s pocket. One example is where we have helped parents in Spain gift their properties to their children, who live in the UK, whilst the parents continue to live in the property. This could save thousands in future inheritance tax.

Positioning investments in tax efficient structures can also help protect against inheritance tax. We have the solutions.

One kind of hangover is enough………

By Chris Webb
This article is published on: 2nd December 2019

02.12.19

If you´re anything like me, you´ll be busy planning Christmas. Anything from where to see the best festive displays in Madrid, to trying to get your family EVERYTHING they want.

Christmas is an exciting time of the year for all of us. As a parent I still love that my children think Santa will make a personal appearance to our house and that he will be parking his sleigh right in the back garden (I have some doubts that they´re now just stringing me along, but I will continue to enjoy it while I can).

We´re all busy fitting in lots of social occasions, handing out gifts and cards and trying to squeeze in a party or two. However, there is also a serious side to the festive season: it’s very easy to overspend and overindulge and end up paying for it well into the new year.

Statistics show that most of us use credit cards to fund Christmas present purchases and to attend occasions we might not normally attend. Unfortunately, many people have problems paying back that debt after Christmas.

I have put together some tips to make sure you start 2020 on the right financial foot, and hopefully this will help you get through the festive season without a financial hangover.

1. Plan your shopping
Always write a list! My wife will laugh aloud at this as I am useless at writing lists BUT it is one of the most important things to do. Never just hit the shops; always write a list of who you want to buy for, an idea of what you want to buy and how much you want to spend. Without your list you´ll shop aimlessly and make purchases on a whim. You´ll lose track of your budget and spend unnecessarily.

Planning and making a list also means you can do some internet research to see what shops have the best sales, or if you could buy the gift online cheaper and save some money.
Research shows that people spend more than they can really afford on Christmas presents each year and end up with a credit card debt they didn’t anticipate after the ¨silly season¨ ends, so it is important to plan and make sure you know how much you can afford to spend.

2. Establish some ground rules
This is an important tip. Too many people get caught up gift giving. It’s nice to give and receive gifts, but it’s helpful to have ground rules. Have the conversation up front with family and friends to make sure everyone is on the same page. Agree on spending limits and who you will and won’t be buying for. This avoids offending anyone or any awkward moments at the Christmas table.

Being part of a big family, we decided to make it about the kids. If we didn’t it would mean buying a lot more presents and spending a whole lot more. When the whole family do get together for Christmas, which is rare due to the geographical situation of our family, then we do a Secret Santa for the adults where limits are set so everyone is on the same page.

3. Focus on personal value rather than financial value
All too often, people get caught up in spending money on gifts at Christmas and focusing on the financial value of those purchases. Instead, focus on the personal value.

From my own experience, I´ve had many a ¨nice¨ item bought for me, but the one present that means more to me than anything else is a framed picture where my kids used their hand prints to make a picture of two robins sitting in a tree (it has a very personal meaning). It has pride of place in my office and is appreciated far more than anything new, shiny or tech related.

Remember, it’s the thought that counts.

4. Avoid the financial hangover of festive season events
Festive season events can cause more than one hangover and let´s be honest, we don’t really enjoy any hangover.

Additional and sometimes unexpected events can really hurt the finances, as we never tend to factor them in to our regular spending habit´s but everyone thinks it’s ok to do it because it’s Christmas. Its amazing how these additional costs add up. Tickets to events, food & drinks, transport, new outfits…the list goes on and on.

If you are planning on being a social animal, think about the event before you go. Plan your whole evening and understand the whole cost of the event, not just the ticket price.

If your budget is a bit tight, be selective and choose the events you can afford to go to. You don’t have to go to everything. Don’t be pressured into attending something just because it’s Christmas. And remember, it’s ok to say no and you don’t need a new outfit for every event!

Finally, if you´re the host don’t be afraid to ask people to bring something to share. Whenever we plan an event, we always ask people to either bring a plate or bring a bottle. People are more than happy to help and generally aren’t expecting a free ride.

5. Make room for the new by getting rid of the old
This is probably more important when kids are involved. Why? Because they seem to have everything already and as they get older it becomes a struggle to know what to buy them. Generally, kids are going to get a lot of gifts. If you have children, you´ll know exactly what I mean. Don’t be afraid to ask them what they don’t play with anymore or what they don’t want anymore.

Look to see what you can dispose of. That’s a harder job before Christmas but can help financially if you can offload unused toys to offset new toys. I had this exact conversation with my daughter, Christmas 2018. All she wanted was a new iPhone, so after first agreeing with the wife to splash out on a new model, we then agreed that the old one was ours to do what we wanted with. A quick online sale gave us €200 which made the new purchase a lot less painful.

We also donate some items to charity; whilst that doesn’t help us financially, it makes a huge difference to others.

6. January sales
Post-Christmas sales can be a great opportunity to get a bargain, but they can also be a good opportunity to get sucked in and enhance the Christmas hangover. Do you really need to go out splurging cash just because there´s a sale? If so, then it’s important to go into the sales with a plan, just like in tip 1. Have a list of what you need so that when you go to the sales you go looking for specific things.

And remember, if you’re planning on hitting the shops with your credit card, you have already put pressure on that pre-Christmas.

7. Survive the school holidays with budget-friendly activities
This is important throughout the year but is still a big part of the silly season. Kids are about to start school holidays and it’s important to budget for entertaining them during that time.

There are so many free things to do with kids in and around Madrid. Most of this can be researched online and within our many local Facebook groups. You don’t need to spend a fortune. We´re lucky enough to have some fantastic parks nearby, some amazing countryside within a short drive and all at no cost.

Planning is crucial. If you plan the money you have available for the period it needs to last, you are less likely to feel the strain of not having enough money.

No Financial Hangover!

8. Plan now for 2020
Planning for 2020 and next Christmas is very important. Talk to your family early about the plan for next year and get the ball rolling straight away so you can be prepared well in advance. Plan birthday and Christmas presents so you can buy in advance and save spending more on less just because it was last minute.

The most important thing to take away from all our tips is to PLAN. Planning plays an important part in being in control of your finances and aware of what you can afford and how much you are spending.

I make no apologies for writing a sensible guide to avoiding the Christmas hangover. Most of us are too focused on the here and now, ensuring we have a great time, only looking at the implications of that good time when the bills start to roll in come January. I hope this will help you to enjoy the festive season, allow you to spend what is right and celebrate without any financial regrets.

Wishing you all a great Christmas and a prosperous New Year!

To book your personal financial review call me on 639118185 or drop me an email at chris.webb@spectrum-ifa.com

Arts Society de La Frontera event

By Charles Hutchinson
This article is published on: 27th November 2019

27.11.19

The Spectrum IFA Group again co-sponsored an excellent Arts Society de La Frontera lecture on 20th November at the San Roque Golf & Country Club on the Costa del Sol. We were represented by one of our local and long-serving Advisers, Charles Hutchinson, who attended along with our co-sponsors Prudential International in the form of George Forsythe.

The Arts Society is a leading global Arts charity which opens up the world of the arts through a network of local societies (such as in Spain) and national events throughout the world.

With inspiring monthly lectures given by some of the UK’s top experts, together with days of special interest, educational visits and cultural holidays, the Arts Society is a great way to learn, have fun and make new and lasting friendships.

At this event, over 120 attendees were entertained by a talk on Stolen Masterpieces: The Most Sensational Art Thefts in History by Shauna Isaacs who is one of the UK’s top experts in this field. She gave an excellent lecture revealing to us the history and reasons behind great art thefts. She is also a particular expert in the Nazi thefts of Art prior to and during the Second World War which she covered in a later Arts Society lecture that same day.

The talk was followed by a drinks reception which included free raffle for prizes including a CH supplied book on Stolen Masterpieces, Christmas crackers and mince pies. Prudential International donated a bottle of 12 year old whisky.

All in all, a great turnout and a very successful event at a wonderful venue, although we were in temporary accommodation as the main clubhouse is under renovation. The Spectrum IFA Group was very proud to be involved with such a fantastic organization during its current global expansion and we hope to have the opportunity to do so again.

Financial Planning Impact of the Spanish Election

By Barry Davys
This article is published on: 13th November 2019

13.11.19

The 10th November (10 N) General Election has, like in many other countries in Europe, resulted in no party gaining a majority of seats in parliament. The result is unsurprising, but what does it mean for our financial planning as individuals who are living in Barcelona and the Costa Brava?

With elections come many headlines, often contradictory. More and more we need to look beyond the headlines to find real data that helps with our planning. This is an example of why we need to look beyond the headline. The headline is ‘Ibex (Spanish Stock Market) rises 9.45% year to date’. Beyond the headline we find that profits of the companies that make up the IBEX index have fallen 20% to end of September 2019. How does this contradiction happen? The Ibex has no top weighting, unlike other indices, so can be highly affected by one company or a sector. The largest company on the IBEX 35 is Inditex (Zara etc) at 14% of the index. The banking sector represents 21% of the IBEX. This can lead to a distorted indication of the performance of a broader selection of Spanish companies. I have used the example of the IBEX because we live in Spain but it is similar for most indices around the World.

Below, I summarise points of the Spanish election that will impact our planning:

There is no sign that plans for post Brexit will be changed because of the election. This includes, for example, not changing the double taxation agreement between Spain and the UK.

It is unlikely that the change to a standardised method of Inheritance tax across Spain, as required by the EU, will be implemented as there is no majority government. Existing inheritance tax laws in Spain will remain the same.

The 10 N election was triggered because of the voting down of the budget proposed by the last government. The new government could well face a similar struggle to pass a budget. This means no changes to the tax rules and spending plans.

Still, borrowing by Spain will increase each year and this is similar across many European countries. Despite this, European government bonds have a very high price, many giving negative interest. Should you include these in your portfolio at this price?

The high prices in the stock market index and government bonds mean that headlines appear that suggest investing in commercial property as an alternative (there are lots of commercial property funds available). These headlines can include property growth rates from the last 10 years where property has enjoyed falling and very low interest rates. However, economic growth is slowing across the World and technology is changing our work, how we shop and play. Slowing economic growth and technological change mean that commercial property is not likely to do so well. A very careful approach to which property a fund manager buys will be especially important over the next 10 years. Without a majority government, we are unlikely to see Spain buck the World trend for lower economic growth.

We can take the following actions because of the elections:

Tax in Spain. We know the taxes and how to plan in a tax efficient manner because we have not had revisions since the last budget. Make your investments tax efficient.

Not all commercial property will do badly. Warehouses and logistically important points will do better than factories, for example. Warehouses are part of the Internet delivery system, which is becoming an increasingly large part of the shopping process for both companies and individuals. If we like commercial property we do not have to invest just in Spain. It is possible to invest in most of the developed markets.

When Barcelona city indicates that it will use driverless cars in the centre of the city, investment funds will buy car parks. It is estimated that the use of driverless cars will reduce the need for car parking in a city by as much as 70%. This could be a good opportunity as these car parks will be turned into other property types such as 3D printing manufacturing points, drone landing spots for internet deliveries and more. Admittedly, we may need to wait awhile before this happens.

Do not despair with shares. The major indices are used for headlines to give an indication of the relative price position of the market. Yet these indices are based on only a few companies e.g.

Spain Ibex – 35

France Cac – 40

Germany Dax – 30

UK FTSE – 100

There are many other companies to invest in these countries. We can also use funds which invest in companies doing business in and with India or China, for example.

There are some excellent opportunities in markets but it requires very careful and technical analysis to know which companies. Get help! See a previous article “5 mistakes the rich never make” which explains how the rich get help with their planning. I put this into practice in my own planning by using fund and investment managers to do the day-to-day management of my investments.

Good luck with your planning. If you would like to discuss help please feel welcome to contact me, especially if you own a business or are approaching retirement.

About the Author
Barry Davys is a partner with The Spectrum IFA Group. He lives in Barcelona and provides financial planning specifically for international people who live in Catalonia using his knowledge of Catalan, Spanish and UK tax. The advice is given in English. Business owners and people approaching retirement find his guidance particularly useful.

UK Pension transfer – most common questions asked

By Chris Burke
This article is published on: 8th November 2019

Without even mentioning the ‘Brexit’ word, if you have a private or company pension scheme in the UK but reside outside, it’s a good idea to understand what your options are in managing and having access to them. There are a handful of subjects I am regularly asked about regarding this:

UK pension currency
If you transfer your pension outside of the UK, it does NOT have to remain in sterling; all major currencies are usually available. It can also be changed at most times and be held in different currencies. Of course, at the moment this is an even more important thought process for your retirement savings.

Access to pensions
From age 55 you can have access to as much of your UK pension as you like, although bear in mind that in Spain pension money will be subject to personal income tax, after any allowances. Therefore, you might want to arrange this so as to not incur higher taxes (there are several ways to do this).

Pensions from a previous employer
These pensions are known as dormant or frozen, and at the very minimum you should know what you have, where they are and how they work. We help clients track these down, explain how they work, what your options are and start planning to make them either more ‘healthy’ or easier to access. Some pensions may have high charges, or the pension scheme could be financially in trouble. Having all this knowledge as well as the options available will help you make an informed decision.

Can I transfer any pensions I have myself?
In short, if you are abroad, no, since the process is complex and not easy to understand if you are not in the financial world. Also, HMRC won’t allow it unless you have received advice. We have clients with different levels of experience in finance and pensions, and we work alongside them all closely, giving them the knowledge to make their decisions and managing the process for them.

If they are UK pensions and you want to keep them in the UK, then yes, you can usually do this yourself depending on the value involved.

You cannot transfer a pension to another person, although there are ways you can pass it on effectively.

Pensions transfer charges
When overseas pension transfers were started many years ago, the costs were a lot higher than running a UK pension scheme, although the benefits were greater. Now, with increased competition from providers, the charges for moving and maintaining an overseas pension are a lot lower. However, this does depend on who you perform the transfer with and what advice you are given. I still come across clients where the charges are so high it is almost impossible for the pension to grow. There are ways of helping these people, but usually by then they have lost out on many years of growth, which is really frustrating as it didn’t need to be that way. It’s so important you work with a Financial Advisor who is working for you, at your pace and advising in your best interests, not theirs.

Selecting a Financial Advisor to work with when investigating moving a UK pension
There are several points/questions you should check when deciding whom to seek advice from. These are:

1) Recommendations, you cannot beat them. Does anyone you know work with a Financial Advisor and they are happy with them?
2) Does the Financial Advisor have the necessary qualifications to give you advice?
3) How are they remunerated? Ask them how much and when.
4) Do they have any long-standing clients you can speak to? If they do and you manage to speak to them, ask them specific questions so you know they are both genuine and how it worked for them.
5) Look into their eyes… meet them several times, get a feeling for them as a person, their morals and actions.
6) Research them on the internet, or ask around and see what’s said about them.

I do know clients who have done most of this and still not had a great experience. The only additional advice I can give is to look at the pensions and companies they are recommending. If you haven’t heard of them before or you don’t get the ‘spider sense’ that they purely have your best interests at heart, then look elsewhere. Remember, they are going to be looking after your retirement. For years I have helped people evaluate their pensions, and as well as looking to help new clients, the main reason I write these articles is to help people avoid potentially working with someone that doesn’t have their best interests at heart.

Your right to vote and the risk of doing nothing

By John Hayward
This article is published on: 31st October 2019

31.10.19

So we pass another Brexit date with 31st January 2020 the next one. I have some questions:

Will there be a (another) referendum before?
Who will win the General Election on 12th December?
Does anyone in a position of power really care?
What will I get for Christmas?

These are all unknowns, to me at least, but there are two that I can have an influence on. If I´m good, I could get something nice for Christmas. Perhaps a matching sock for last year´s. I could also have an effect on who gets elected in the UK on 12th December.

The 15 year rule
It is generally known that one has up to 15 years to register to vote in General Elections in the UK having moved abroad. Although there has been talk about abolishing this rule, it still exists. One aspect generally unknown is that you have the right to vote if you registered within the last 15 years after moving abroad. Therefore, this means that you can vote in the upcoming election if you registered on or after 12th December 2004. In my case, after leaving the UK in late 2004, I believed that I had missed the opportunity by a month or so. In fact, and because I registered to vote in the 2005 election, I have been told by my last constituency office that I have until 2020 to continue voting.

If you left the UK within the last 15 years then you simply register now. I believe that you have up until 25th November to do so. If you have registered to vote within the last 15 years, after leaving the UK, I suggest that you get confirmation from your last constituency office and then register to vote in the coming election at https://www.gov.uk/register-to-vote.

Unfortunately, this could be an election based purely on Brexit. We know more now than we did in June 2016 and so, hopefully, whoever wins, there will be clear direction and they get on with leaving or staying.

Lost benefits waiting for Brexit
Many people have delayed making decisions due to Brexit uncertainty, especially when it comes to buying property or investing. On the property side, this has meant missing out on property value gains, lost rental revenues, or simply a delay in the dream move. From our side, in the investment world, those who have been invested in the types of cautious fund that we promote have seen their money grow by over 20% since the referendum in June 2016. At the same time, for those people who have left their money in the bank in readiness for what they didn´t really know, have seen their money reduce in real value by around 11% through inflation. In simple terms, £100,000 invested in a low risk fund would now be worth £120,000, £107,000 when allowing for 11% inflation. Left in the bank, with no interest, £89,000. People would be up in arms if they were told that their bank was charging them 2% (£2,000 in this example) a year in charges but this is effectively what inflation has caused and has been the consequence of ‘playing safe’.

There´s probably another ‘Brexit’ around the corner, but life goes on. I look forward to receiving my sock regardless of who is Prime Minister on 25th December.

To find out more about how you could benefit from quality financial planning advice and years of experience both in Spain and the UK, contact me today on +34 618 204 731 (call or WhatsApp) or at john.hayward@spectrum-ifa.com

Is this the time to invest and where?

By Charles Hutchinson
This article is published on: 23rd October 2019

I was having lunch with a friend of many years the other day. When I asked why he was not currently invested and why he had not been for some time, he replied that it is too dangerous a time in the world with too many problems and that we were on the verge of a global market collapse. Further investigation revealed that he had had his money in the bank, largely unprotected against bank failure and earning less than a single digit interest rate (and that was for his Sterling) which was also taxed. What made it worse was that the majority of it is in Euros and he was actually having to pay charges to the bank for the privilege of keeping it there.

Although this sounds an extreme example of bad financial planning, it shows that we need to take professional advice sometimes. We need to diversify and we need to understand that the world is no worse or insecure than during the terrible wars and crises of the past. Money is not a Will o’ the Wisp, disappearing into thin air when not being utilised; it has to have a home in which to dwell for better or for worse. The secret, therefore, is to place it for the better in homes that are largely secure, allowing you to diversify smaller amounts somewhere else for better returns. In this era of low interest rates, which is set to continue for quite a while, that home should not be in a bank, except for your current account and a cash reserve for emergencies and planned spending over the next, say, 2-3 years. There is limited protection against bank failure and the return to be obtained is taxable and insignificant.

My old friend lamented that this was not the time to enter the market, to which I replied that there is no good time until you have left it too late (this is true of most markets). It is not market timing which is important, but time in the market. Unless you have a trading account for speculative investment, you must always plan to invest for the long term (5 years plus). The investment house Fidelity produced some excellent statistics which showed that (once invested) by not being in the market for just 10 specific days in the last 10 years, you would have lost nearly 50% of the market (London FTSE100) growth each year versus staying fully invested. Missing 20 days, this would have been halved again.

Missing out on 30 days, you wouldn’t have broken even after brokerage charges. Markets are like the tide on the sea shore – they rise and they fall. The difference is that each time the tide comes in, it reaches a little higher up the beach. And that is caused by a natural phenomenon called inflation, which moves hand in hand with growth

I asked my friend if he was invested in 1987. He looked away gloomily and said that he had instructed his broker to sell out all his positions when the October crash arrived that terrible Monday morning. He watched with dismay as the markets around the world collapsed as soon as they opened and there were no buyers, fuelled by a flawed computer system over which there was no control. He lost over 35% of his capital over the next four days. At the time I was a trainee investment manager on the Australian desk of a prominent investment house in the City. The telephones rang off the hook and our advice was emphatic and simple: do not bale out. Hang in there. I remember my mentor, who was a keen yachtsman, saying, “If you are in a boat out at sea and a big storm blows up, you don’t jump overboard, do you? No. you batten down the hatches and wait it out”. This is the advice I have always given my clients ever since. Those who heeded our advice and waited it out actually ended that year in a higher position than when it started.

I can hear some readers already asking where they should place their hard earned capital after a life time of working and saving. There is no one single answer to this. It depends on your risk tolerance, your likes, and your needs (now and in the future). As ably described in our book “A Guide to Investment Risk” by Peter Brooke (opposite), diversification is everything.

This could be across multiple global asset classes (to include gold bullion, diamonds, antiques, rare paintings, rare books, classic cars, etc.) or it could be an investment portfolio containing multi global assets managed by multi managers of different expertise and disciplines. It is always wise to remember that Risk is linked directly to Reward. The higher or lower each one is will reflect in the other. Also reflected is volatility, where the higher performing assets will mostly endure higher volatility (continuous high/low oscillations which are not for the faint hearted). When doing financial reviews with clients, we are careful to establish their risk appetite and the returns that can be expected taking into account that risk.

You cannot have a high performing low risk investment – there is no such animal. What you can expect from a good adviser is a steady performing investment at whatever level you set your tolerance to give you the return you want as long as you run the course, who does not try to time the market and who picks long established names who have been around many years. We often recommend long established (each over 150 years) London based investment managers to manage a client’s private portfolio, or we place clients in multi asset, multi manager investment funds. To those who are averse to volatility, we offer “smoothed” investments which are described by my colleague Anthony Poole elsewhere in this website in “Tax Efficient Investments“. These are safe secure investments which are tax efficient and which produce a steady return year after year, way above anything you can expect from a bank product.

Greed is the enemy of many investors. It is the curse of humanity. If you are not greedy, your money will grow securely at a respectable pace. Manage your own expectations – do not alter course when you see your returns are doing well. Do not cut corners, especially with tax. We only choose tax efficient products. Investment choice and tax efficiency are completely entwined. Tax is another subject to be explored in more detail and is covered elsewhere on this site by my colleagues. If you would like a copy of our Spanish Tax Guide 2019 (there is also one available for France), please contact me below.

To discuss these points in more detail, why not call me to make an appointment and let’s have a coffee together? Please remember, there is no commitment on your part but such a huge commitment on ours! With care, you will prosper.