Deal or No Deal…?

By John Hayward
This article is published on: 20th November 2018

20.11.18

As someone who has lived and worked in Spain for more than 14 years, and keen to stay here with my family for the foreseeable future (children moving to other climes accepted), I am very interested in the rights of British citizens in Spain post Brexit. A colleague of mine is part of a group in Italy set up to protect the rights of British citizens there. A member of this group has put together a very comprehensive list (non-exhaustive) of things that you may need to do to prepare for a No Deal Brexit scenario, which after the events last week, seems to be becoming an ever-closer reality. I have made the list more Spanish.

Whilst there may be some deal agreed anywhere up to teatime on the 29th March 2019, there are several items on the list which many people should already be applying.

At the same time we don´t want to get caught up in scaremongering, I have come across several reassuremongers who just choose to live in the “it won´t affect me” world. There are already changes being made to British statutes in readiness for leaving the EU, with or without a deal. Getting one´s house in order now is almost certainly going to be easier than from 30th March 2019 onwards.

Here is your almost definitive list of things to do to prepare for a NO Deal Brexit.

1. MAKE SURE YOU ARE LEGALLY RESIDENT IN SPAIN UNDER CURRENT RULES.

That means you should:

Apply for residencia under the current rules. As an EU citizen you must register as a resident if you plan on living in Spain for more than 3 months.
You should register in person at the Oficina de Extranjeros (immigration office) or designated police station in the province where you live.
Before going to your local Oficina de Extranjeros or designated police station, you must make an appointment online, which can be done on the Spanish public administration website.
Once on the online appointment booking system, you should select the province where you live and then the option “Certificados UE” and follow the instructions to select and confirm your appointment time.
When you go to your appointment, you will be required to provide documents to support your application. You will need evidence of a specified minimum level of financial income which could be in the form of a letter from your Spanish bank manager and, if you are not working, private health insurance or an S1 (which you obtain from the UK if a pensioner). This will evidence your legal residence in Spain and give you proof that you were legally resident on 29 March 2019. This may be like gold dust in the case of a no deal exit, and if there is a Withdrawal Agreement it will help you benefit from a streamlined process to receive a new card if necessary under post-Brexit rules.
Years of living in Spain do not necessarily count – only legal residence. So if you have been living ‘under the radar’ so-to-speak, try to rectify the situation in advance of 29th March 2019.
Apply for a Residencia de carácter permanente (‘permanent residence’) under existing EU provisions if you have been legally resident for at least 5 years. It is the best evidence that most of us can have of our long-standing residence in Spain.
Make sure that you’ve submitted tax returns in Spain. As a resident, (whether in the first 5 years or afterwards with Residencia de carácter permanente, you are required to submit tax returns and pay tax in Spain on your global assets, income and gains even if all of them originate from the UK).
Make sure that you either have private health insurance (obligatory for the first 5 years of residence unless you have an S1 from the UK or are working), or that you’re registered in the Spanish health system (e.g. you already have a Residencia de carácter permanente under existing EU provisions).

2. CREATE, AND KEEP UP TO DATE, A DOSSIER, AS IF YOU ARE APPLYING FOR RESIDENCIA OR RESIDENCIA DE CARÁCTER PERMANENTE OR CIUDADANÍA ESPAÑOLA, IN PARTICULAR:

Collate copies of as many of your tax returns as you can get – tax returns, proofs of payment and receipt. These days there is online access to your tax files and records.
Put together a file of utility bills for at least 10 years if you can. This will prove your continued residence.
If your name is not on the bills for your household, or on any utility bills, get it added now.
For women in particular: make sure that the name on bills, bank statements, pension statements, payslips etc. matches the name on your passport if possible.
Put together a file of bank statements, wage slips and/or pension statements for the last 5 years if you’ve lived here that long. Longer is even better – 10 years is best. You may need these to prove the stability and sufficiency of your resources.

3. CHECK YOUR PASSPORT
Make sure your passport will be valid for several months after 29 March 2019. If not, consider renewing it early. Also, check your signature.

4. MAKE SURE YOU ARE IN SPAIN ON 29TH AND 30TH MARCH 2019
This is probably not the best time to make a family visit to the UK! Transport could be chaotic, with no agreements on air or other travel between the UK and EU.

5. TOP UP YOUR MEDICATION

If you currently rely on an S1 form for access to the Spanish health service and/or you need regular medication, think about making sure you have a good supply of it on 29 March 2019.
If the worst happens and the reciprocal health care system stops on that date it might take several weeks to get an alternative system up and running and there may be short term chaos. Making sure that you have the permitted 3 months of long-term medication would mean that you’d avoid having to pay full whack for your meds or being without a family doctor while the situation was resolved.

6. CHECK YOUR DRIVING LICENCE

If you’re still using a UK driving licence, apply for a Spanish licence now. It’s relatively straightforward and for most people, it can be exchanged (with some fees and a medical) without having to take a full Spanish driving test (theory and practical). It’s possible that UK licences will not be valid in the EU in the case of a no deal Brexit.
Consider applying for an International Driving Permit if you regularly drive in the UK.

7. THINK ABOUT MOVING MONEY
If you have bank accounts, savings or investments in the UK, consider moving them to Spain or into Spanish compliant vehicles, or some other EU jurisdiction now. Sterling may drop suddenly in the case of a no deal exit; there may also be temporary problems moving money in and out of the EU.

8. TRY TO HAVE A FINANCIAL BACKSTOP
If at all possible, try and make sure you have access to enough cash to see you through two or three months, especially if your income comes from the UK and is transferred monthly.

9. CONSIDER YOUR PERSONAL PENSION
If you have a personal pension (not state or public service occupational) and have not yet retired, think seriously about cashing it in if you’re old enough (take financial advice on the tax implications of cashing it in before doing so), or transferring it. A detailed pension analysis would be required to look at the suitability of doing so but it might just be possible to remove your pension from future UK political and tax problems as a result of No Deal Brexit scenario. There may be issues with passporting rights after Brexit that could cause problems with insurers making payments to those living outside the UK.

10. LOOK AT WAYS YOU CAN MAXIMISE YOUR INCOME AND MINIMISE YOUR EXPENSES

This applies particularly if the bulk of your income is in sterling, which may take a serious hit after a no deal exit. Can you survive if sterling hits parity? Goes below parity? What’s your bottom line? What can you do to turn your income into euro income?
Create a personal financial contingency plan. Look at ways you can cut your spending temporarily, and at ways you could create additional income.
Get any potentially expensive dental or optical work done now.

11. IF YOU HAVE A BUSINESS THAT RELIES ON ATTRACTING PEOPLE FROM THE UK.

Can you change your client demographic? Whatever the deal or no deal, British people may limit their travel to the EU next year and you may need to find new clients if you’re to survive financially. Make sure you have a website in the language of the nationality of people you may wish to attract, if you haven’t already, and that you begin to advertise NOW to attract other customers.
But …
If there is a no-deal Brexit, it is uncertain as to whether you will be able to continue to run a business at all.
Even if there is a deal, you may not be able to provide services to customers in other Member States: that is still to be decided.

12. PUT SOME WORK INTO LEARNING SPANISH

Whether there is a deal or not, we may be required to re-apply for residencia and/or Residencia de carácter permanente.
We do not know whether a minimum level of Spanish language ability will be required (to date it has not been), but it is a good opportunity to work on the language skills. If nothing else, it opens other social doors and means you don´t have to stick to the same bar, club, or shop

13. THINK ABOUT, OR RE-THINK ABOUT, APPLYING FOR SPANISH CITIZENSHIP

For many people, their British identity and nationality is important to them and the idea of taking out Spanish citizenship has been regarded as ‘only as a last resort’. For some of us, a no deal Brexit might be that ‘last resort’. Spanish citizenship won’t guarantee all the rights you currently hold as an EU citizen (mutual recognition of professional qualifications, for example) but it will guarantee you the right to reside and to work – and as an EU citizen you’d continue to benefit from full free movement rights.
It you are thinking of applying for Spanish citizenship, try to ensure your application is lodged before 29 March 2019. The Spanish authorities do not say how long the process will take but assume at least months (las cosas de pálacio van despacio). In addition, language tests will be required (see point 13). If you’ve already made the application, there is more chance of everything passing through than if you wait till after 29 March when all the rules may change.
Be aware that taking out Spanish citizenship may affect the taxation of certain pensions and you should take good financial advice before applying.

14. MARRY A SPANIARD
This may not be as easy as it once was, with changes to immigration laws, but it might be a solution for you, especially where children are involved.

15. GET YOUR PROFESSIONAL QUALIFICATIONS RECOGNISED NOW

The European Commission has said that, whatever the outcome of the negotiations, Brexit does not affect decisions made pre-Brexit by EU27 countries recognising UK qualifications under the general EU directive on the recognition of professional qualifications (Directive 2005/36/EC). For details of which qualifications are covered see
https://ec.europa.eu/growth/single-market/services/free-movement-professionals/qualificationsrecognition_en
So if you have a UK qualification covered by that Directive and you need to be able to use it, apply to get it recognised before March 30th 2019.

16. ABOVE ALL…DON’T PANIC.

This is about hoping (and working) for the best, while preparing for the worst. Whatever happens, you won’t be alone.

And there you have it. There isn’t a better list anywhere about what to do in a NO Deal Scenario. I would like to say that I think that some kind of deal/arrangement will be agreed in the end because there is too much at stake on both sides of the Brexit divide, BUT I have to admit that I was wrong about Brexit happening in the first place and also about the election of Donald Trump as US president. I was convinced neither would happen. This time I am taking precautions and implementing most of the items on this list. I hope you do too.

Arts Society de la Frontera – Costa del Sol, Spain

By Spectrum IFA
This article is published on: 20th October 2018

20.10.18

The Spectrum IFA Group again co-sponsored an excellent Arts Society de la Frontera lecture on 17th October 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 Richard Brown and Harriette Collings from Tilney Investment Management. Tilney were invited to a private lunch afterwards where they met potential clients.

The Arts Society de la Frontera (previously named the Decorative & Fine Arts Society) is a leading 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 world’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 175 attendees (probably a record Spectrum sponsored attendance) were entertained by a talk on Gold in paintings and wall coverings entitled “As Good as Gold” by Alexander Epps who is one of the UK’s top experts in this field. She gave an excellent talk and engaged the audience for almost an hour!

The talk was followed by the sponsored drinks reception which included a free raffle for prizes including CH produced Champagne, wine, a tea set and a lovely coffee table book on Gold craftsmanship. Tilney also supplied a cocktail shaker designed and beautifully crafted by Viscount Linley, the Queen’s nephew, which caused a further stir after their last event’s prize!

All in all, a great turnout and a very successful event at a wonderful venue. The Spectrum IFA Group are very proud to be involved with such a fantastic organisation and we are booked to sponsor further lectures this December and March next year.

The Gift of Giving

By Katriona Murray-Platon
This article is published on: 19th October 2018

19.10.18

In my family, there are a lot of birthdays at the end of the year and before you know it Christmas is upon us. With only limited space for physical gifts like clothes or toys, sometimes cash gifts or contributions to the children’s savings plans are more than welcome! But how much can you give your children, grandchildren, nephews and nieces? As we will see, whilst the rules on official gifts and inheritance allowances are very clear, there seems to be much more flexibility on smaller gifts for special occasions.

Gifts from a UK resident to a French resident – UK tax applies
If you receive gifts from a UK resident, such gifts are generally subject to UK tax rules. However, if the recipient has lived in France for at least six of the ten tax years preceding the year in which the gift is received, French tax rules will apply. Inheritances are covered by the Double Tax Treaty between France and the UK but gifts are not. Inheritances are not taxable even if the recipient has been living in France for more than six years. If a double tax situation were to arise then the tax paid in the UK would be deducted from any tax payable in France. French tax is also payable if a UK resident gifts an asset that is situated in France.

A gift is defined as anything that has a value, such as money, property, possessions. If a person were to sell their house to a child, for less than its market value, then the difference in value would count as a gift.
Gifts to exempt beneficiaries are not subject to Inheritance Tax. These include:

Between husband, wife or civil partner, provided that they reside permanently in the UK
Registered UK charities (a list is available on the gov.uk website)
Some national organisations, such as universities, museums and the National Trust

HMRC also allows an annual exemption of £3,000 worth of gifts to people other than exempt beneficiaries each tax year (6 April to 5 April), without them being added to the value of the estate. Any unused annual exemptions may be carried forward to the next year, but only for one year.

Each tax year, a UK tax resident may also give:

Cash gifts for weddings or civil ceremonies of up to £1,000 per person (£2,500 for a grandchild or great-grandchild, £5,000 for a child)
Normal gifts out of their income, for example Christmas or birthday presents, provided that they are able to maintain their standard of living after making the gift
Payments to help with another person’s living costs, such as an elderly relative or a child under 18
Gifts to charities and political parties

These exemptions may be cumulated, so a grandchild/nephew/niece could receive a gift for their wedding and their birthday in the same tax year. However, if the wedding or civil partnership is cancelled, the gift for this event will no longer be exempt from Inheritance Tax.

There is an unlimited amount of small gifts allowance of up to £250 per person during the tax year provided that the person making the gift hasn’t used up another exemption on the same person (such as the £3,000 annual exemption limit).

In the UK, Inheritance Tax is payable (at 40%) on gifts made in the 3 years before the donor’s death. Any gifts given between 3 to 7 years before death are taxed on a sliding scale known as ‘taper relief’. Gifts given more than 7 years before death are not counted towards the value of the estate. Inheritance tax will apply if the gift is more than £325,000 in the 7 years before the donor’s death.

Gifts from a French resident to another French resident or to a UK resident – French gift tax rules apply
In France, the Inheritance Tax allowances are not as generous as in the UK. The tax relief on gifts is the same as for inheritance tax and depends on the relationship between the donor and beneficiary. A parent may only give their child up to €100,000 tax free, a grandparent only €31,865 to a grandchild, brothers and sisters may receive €15,932, nephews and nieces € 7,967 and great-grandchildren €5,310.

There is no inheritance tax between married couples or those in a civil partnership, however, for gifts made during a person’s lifetime the maximum amount allowed is €80,724.
Gifts made to disabled persons, subject to certain conditions, have an additional exemption of €159,325 per person irrespective of the relationship between the donor and the disabled person. This exemption is in addition to the normal exemptions above.

These exemptions for gift tax (or ‘droits de donation’) may be used several times over during one’s lifetime, provided that there is a 15-year gap between each gift.
As in the UK, financial support given to a child/ex-spouse/dependent relative on a monthly/annual basis is not considered as a gift in French law, but rather as a family duty. Such support, or ‘pension alimentaire’ as it is called in French, is tax deductible for the donor but must be declared as income by the recipient.

A gift (called ‘don’ in French) may be a physical object, a house or property or intangible gifts like shares or intellectual property rights. If the gift is a house or property, a notary will be required, and he/she will make sure that the proper gift tax declarations are filed. The transfer of property must take place immediately and once given is irrevocable.

Cash gifts, (‘don manuel’ in French) – made by hand, cheque or bank transfer – are subject to different rules. A cash gift of €31,865, may be given to a child, grandchild, great-grandchild or, if there are none such, to nephews, nieces, or if the nephews and nieces have died to their children or representatives. The donor must, however, be less than 80 years old and the beneficiary must be over 18 years old on the day the gift is made. This exemption is also subject to the 15-year rule and is in addition to the Inheritance Tax allowances mentioned above.

The cash gift allowance and the normal gift allowances may be cumulated as long as they do not exceed the legal maximum amounts. So for example, provided that in all cases the donor is not yet 80 years old and the beneficiary is over 18; a mother or a father can give their child a total amount of €131,865; a grandparent can give an adult grandchild a total amount of €63 730 (€31,865 + €31,865); a great-grandparent can give an adult great-grandchild a total amount of €37,175 (€31,865 + €5,310) and an aunt or an uncle can give a nephew or niece a sum of €39,832 (€31,865 + €7,967).

Such cash gifts must be declared to the tax office the month after they are made. Cash gifts (above these exemptions) are taxable if they are discovered by the tax authorities during a routine enquiry by letter or during an official tax inspection. When the beneficiary declares the gift to the tax office of his/her own accord, they must pay the relevant amount of tax. If the value of the gift is over €15,000 it may be declared and any tax paid in the month after the donor’s death.

The French have another type of gift called ‘Présent d’usage’ which is a gift for normal ordinary life events like weddings, birthdays, graduations, baptisms etc. Such gifts are not considered taxable gifts provided that they are given on or around a special event/occasion and that they are not disproportionate given the level of income and assets of the donor.

There is no law which defines the exact amount of these gifts so each is considered on a case-by-case basis.

The Cour de Cassation ruled that a gift of €20,000 from a husband to his wife was a ‘present d’usage’ as it was given for her birthday and by way of a loan taken out by the husband. The monthly payments on the loan were less than 20% of his net income.

Such gifts are not subject to French gift tax and are not included in the donor’s estate.

So now that you are aware of the rules in both countries you may give or receive gifts knowing exactly what needs to be declared. However, the use of gift tax allowances as a tax planning strategy is something which should only be considered after taking proper advice from a qualified independent financial adviser specialised in cross-border matters.

Le Tour de Finance – Autumn Events

By Spectrum IFA
This article is published on: 17th October 2018

This month saw Le Tour de Finance visit Chateau Val Joanis near Aix-en-Provence and Domaine Gayda near Limoux. As always, the events were well attended, the audiences comprising both familiar faces and first time guests, all gathered to hear invited experts from the world of finance speak about topical issues of relevance to expatriates living in France.

Hosted by The Spectrum IFA Group’s Chris Tagg, the events included presentations and discussion on a wide range of subjects, with extensive interaction between guests and speakers, particularly in relation to Brexit and associated risks and planning opportunities for expats.

Spectrum’s locally based advisers – Victoria Lewis in Aix and Daphne Foulkes in Limoux – spoke about the importance of independent advice, even for the financially aware, and how Spectrum takes an holistic approach to financial planning, identifying for example the most reliable and valuable opportunities for tax efficient savings and inheritance planning in France.

George Forsyth of Prudential International presented on the topic of Assurance Vie, explaining the wide-ranging tax-efficiency of this type of investment and that some international products are fully portable for expats returning to the UK.

Guillaume Tardivat of Currencies Direct outlined how currency specialists offer favourable exchange rates, personalised service and superior on-line account management compared to banks both sides of the Channel.

Robert Walker of Rathbone Investment Management presented Rathbone’s in-house research focussing on a number of potential Brexit outcomes with insight and forecasts for European and UK financial markets. Interesting times ahead.

Jeremy Ferguson offered an update on pension planning opportunities for expatriates in France – mentioning that Brexit and ongoing UK pension reform may reduce scope for transfers from the UK beyond the short term – and emphasised the importance of seeking specialist advice in this technically complex area.

As always, feedback was positive, with much enthusiasm for the revised Question and Answer format and many guests appreciative of the chance to engage directly with the panel of speakers, both during the presentations and more informally afterwards over lunch.

If you weren’t able to join us this time but are interested in any of the subjects mentioned and would welcome a confidential discussion about your financial situation, please contact us through the Spectrum website and one of our advisers, local to you, will be in touch.

France’s new PAYE system

By Katriona Murray-Platon
This article is published on: 12th October 2018

12.10.18

As of 1st January 2019, taxes in France will be paid at source for certain types of income. Although PAYE systems exist in many countries, including the UK, this will be a first for France. Whilst the French authorities are doing everything they can to ensure this reform goes smoothly, it is still a huge change for French tax payers.

Social charges on salaries, pensions and unemployment benefits are already paid at source. Income tax, however, has always been declared on the tax form by the end of May of each year and paid either monthly or quarterly the following year. The problem with this situation is that where there is a significant change in the taxpayer’s life, for example a wedding, divorce/separation, loss of a partner or birth of a child, which would affect the tax payable, these changes were not taken into account until much later.

Those who do not pay tax because their income is too low or, for example, those with UK source income that is not taxed in France (Civil Service pensions, UK rental income, UK salaries) will not be affected and will continue not to pay tax.
From 1st January 2019, the income that will be subject to the pay at source system includes, French salaries, French pensions, French job seekers allowance, benefits, and sickness/maternity pay. The employer or authority responsible for the payments will also deduct the income tax and pay it directly to the tax authorities. Auto-entrepreneurs, micro-entrepreneurs, business owners and the self-employed will pay a monthly amount to the tax authorities. Income tax and social charges on French rental income will be paid monthly or quarterly, directly from the taxpayer’s bank account.

The rate of tax which will be applied was calculated by the tax authorities based on the income declared in 2017. This rate, which is either an individual rate, a joint rate or the neutral rate, appeared on tax statements in 2018. In homes where one partner’s salary is significantly more than the other, they have the option of having individual rates based on their own income. This rate will be communicated by the French tax authorities to employers, pension bodies and the French job centre.

The tax which would have been paid in September 2019 on the income received in 2018 will be cancelled out by a one-off tax credit. This however will not affect dividends, capital gains or withdrawals from assurance vies made in 2018 as they are considered “one-off” benefits.

The self-employed, whose income may change from one year to another, will be able to adjust their monthly amounts on the impots.gouv.fr website in a way which will be simpler than the current payment situation.
What will not change is the rates of tax, the tax credits and tax reductions, and the obligation to declare all worldwide income every year before the end of May. If your income has changed then a new rate will appear on the tax statement in September 2019 and it will apply to your monthly payments from that September.

The new system will not really affect those receiving income from capital. The flat tax introduced in January 2018 will continue to apply in 2019 to interest, dividends, assurance vie withdrawals and capital gains. The tax will be taken at source when the interest is paid into the bank account, or at the time of withdrawal on the gain element of an assurance vie investment. For withdrawals from assurance vie policies which were created or topped up before 27th September 2017, the policy holder may opt to be taxed at the old system (35% tax in the first 4 years, 15% tax after 4 years and 7.5% after 8 years with the abatements of €4,600 per person or €9,200 per couple) or their marginal rate. Withdrawals from assurance vie policies created or topped up after 27th September 2017 (if the amount exceeds €150,000 of capital) will be taxed automatically with the flat tax unless and until the tax payer opts for their marginal rate. However, unless you don’t normally pay tax, in most cases the flat tax is more tax efficient as it essentially reduces the income tax to 12.8%. Social charges at the new rate of 17.2% will continue to apply to all capital income.

For any questions on the above or how you may be affected please do not hesitate to contact your local Spectrum adviser.

Brexit uncertainty and much more…

By John Hayward
This article is published on: 19th September 2018

Brexit uncertainty, losing access to UK bank accounts, victims of mis-sold pension and investment plans, personal visits from HMRC, and kids (sort of) go back to school

Brexit uncertainty
Not for the first time, I was asked how Brexit would affect my work in Spain. My standard answer is I don´t know, in the same way I don´t know for sure what the weather is going to be like tomorrow, irrespective of the forecasts which are given. Based on warnings, especially from social media sources, the weekend should have seen us floating down to Masymas on a dinghy. As it turned out, we had a pretty heavy shower providing some surface water in which a toy dinghy would probably have avoided running aground. Of course, I understand that other parts of Spain have suffered; coastal areas have been hit with tornadoes and waterspouts. My point is, even if you have a good idea what is going to happen, it is rare that things will happen as predicted. In fact, I´m not sure that anyone actually predicted the tornadoes. This happens so often in the financial world. With Brexit, I do not know what will happen. Deal or no deal. Take the money or open the box. Perhaps just phone a friend when necessary. I will just continue to jump the hurdles as they are laid out and not base my actions, or those of my family, on media guesswork, which is often a mile off the result.

Losing access to UK bank accounts
Headlines, both in newspapers and on the television, gave a couple of elderly people a shock. They believed they would lose access to their UK bank accounts after a no deal Brexit. This story first appeared in August this year and was highlighted again this week on television. The fact is that there will be certain banking facilities which, if there is no deal, may or may not, be available for a person living outside the UK. This refers more to deposit and loan arrangements, not to the account itself. Receiving money in the form of a pension may also be an issue in that, according to those who appear to know, making a payment from a UK pension to an EU country will be illegal. The alternative will be to have the payment made to a UK bank account for onward transfer to, say, Spain. For those, especially pensioners, who do not have a UK bank account after moving to Spain, it would be a good idea to open one in readiness for what might happen.

Mis-sold pension and investment plans
Unfortunately, I am being asked to help more and more with people who are suffering from poor financial advice. They have savings and pension arrangements that contain investments which arguably are not suitable and, to make matters worse, have not performed leaving policyholders with significant losses. In some cases, there is little we can do. The damage has already been done. However, in other cases we can restructure without incurring additional large set up costs, which are often part of the reason why these plans have not performed. We are always willing to take a look at investments without charging anything. If there is something that we can do, it will be organised in a fair and equitable manner with the details, blood, guts, and all, explained before you commit.

HMRC comes to the Costa Blanca
There was a presentation in Moraira this week with representatives from Her Majesty´s Revenue and Customs focusing on the obligation for UK tax residents to declare income from assets they hold outside the UK such as rent from a property or interest (no joke intended) on bank deposits or gains on investments. People have up until 30th September 2018 to make this declaration. For more detail you can visit this page from the UK Government website: https://www.gov.uk/government/news/hmrc-warns-its-time-to-declare-offshore-assets

The concern for some people was that they, as Spanish residents, had to declare, having missed the point, understandably, that the declaration was to be made by UK residents for foreign assets outside the UK. We already have the asset declaration for Spanish tax residents in the form of the Modelo 720. At Spectrum we can show you ways to position money within investments in what will still be EU jurisdictions post Brexit so that a) you don´t have to worry about what happens once the UK leaves b) you don´t have to declare the investment separately as this is carried out on your behalf and c) the beneficial tax calculation will still apply.

Kids back to school
Friday 7th September was the last day of summer holidays for our children, although my son will argue that they will continue until Christmas when the festive season kicks in. Since they were last in school, what seems like 10 months ago, but is actually only (!) 10 weeks, it is guaranteed that there will be a book missing or a broken pink pencil, our daughter´s favourite. However, we cannot get too excited. For our daughter, September is only half days and so work/school juggling is still a skill we have to develop.

To find out how we can help you with our financial planning in a manner protecting you and your loved ones, contact me at john.hayward@spectrum-ifa.com or call/WhatsApp 0034 618 204 731

Are you thinking of selling your UK property or have you sold one recently?

By Tony Delvalle
This article is published on: 17th September 2018

Some UK solicitors have failed to inform clients of changes in UK legislation from April 2015, resulting in unexpected late payment penalties from HMRC for failure to complete a form following the sale of their UK property.

Recap of the new legislation
Prior to 6th April 2015, overseas investors and British expats were not required to pay Capital Gains Tax (CGT) on the sale of residential property in the UK, providing that they had been non-resident for 5 years. New legislation was introduced on 6th April 2015 that removed this tax benefit.

Since 6th April 2015, any gains are subject to CGT for non-UK residents. The rate of CGT for non-residents on residential property is, as for UK residents, determined by taxable UK income i.e. 18% basic rate band and 28% above, charged only the gain.

Reporting the gain and paying the tax
You must fill out a Non-Resident Capital Gains Tax (NRCGT) return online and inform HMRC within 30 days of completing the sale.

Those who do not ordinarily file a UK tax return must pay the liability within 30 days. Once you have notified HMRC that the sale has taken place, a reference number is given to make payment.

As a French resident you must also declare to the French tax authority.

The Double Taxation Treaty between the UK and France means that you will not be taxed twice as you will be given a tax credit for any UK CGT paid, but you will be liable to French social charges on any gain.

There is little to mitigate French tax on the sale of property that is not your principal residence. So, it is important to shelter the sale proceeds and other financial assets wherever possible to avoid unnecessary taxes in the future.

One easy way is by using a life assurance policy, a Contrat d’Assurance Vie, which is the favoured vehicle used by millions of French investors. Whilst funds remain within the policy they grow free of Income Tax and Capital Gains Tax. This type of investment is also highly efficient for Inheritance planning, as it is considered to be outside of your estate for inheritance purposes and you are free to name whoever and as many beneficiaries as you wish.

Le Tour de Finance – Saumur 49400

By Amanda Johnson
This article is published on: 13th September 2018

13.09.18

The Le Tour de Finance roadshows give those either living in France, or in the process of moving here, a great opportunity to speak directly to industry experts who are not normally in direct contact with the public.

Where – Château Gratien Meyer, Route de Monstsoreau, Saumur 49400 (https://www.gratienmeyer.com/en/ )
When – 14th November, 2018

The event starts at 10.00am and ends at 1.30pm after a free buffet lunch.

It will offer practical guidance on a range of topics including tax efficient investments, pension transfers, estate planning, currency exchange and much more.

Register for this free event or for further information about it by sending an email with your full contact details to: seminars@ltdf.eu, register online on www.ltdf.eu or call +33(0)1 44 83 64 64
Whether you want to register for our newsletter, attend one of our road shows or speak to me directly, please call or email me on the contacts below and I will be glad to help. We do not charge for our financial planning reviews, reports or recommendations.

Next step for the PEPP saga

By Spectrum IFA
This article is published on: 4th September 2018

To date, many organisations have submitted detailed responses to the European Commission’s (EC) draft PEPP Regulation, which was published on 29th June 2017. There is strong consensus for the merit of the PEPP, both by the Trilogue participants (European Commission, European Parliament and the Council of Europe) and other stakeholders. However, potential obstacles still exist and, unless pragmatic solutions are found, there is the risk that the PEPP could be launched but the take-up may be low.

Therefore, as the PEPP enters its next stage of Trilogue discussions, it is important that the voices of the potential PEPP providers and distributors are still heard, since these stakeholders are well-placed to highlight practical difficulties that would adversely affect the success of the PEPP. A cross-section of these stakeholders came together at the FECIF European Pensions Institute’s (FEPI) inaugural meeting in June. A FEPI position paper has subsequently been produced, which provides detailed analysis, whilst a brief summary of the FEPI’s views is shown below.

Tax Incentives:

It is very important that a pragmatic alternative solution be agreed by the Trilogue, rather than being left until after the Regulation has been enacted. Theoretically, a fully separate tax regime – i.e. a 29th regime – applicable across all of Europe would be ideal in terms of simplicity and portability. However, it is understood that this is not likely to be accepted by Member States.

Therefore, the FEPI recommends that sub-sections can initially be limited to EET (exempt/exempt/taxed) and TEE (taxed/exempt/exempt), as these would align with the majority of Member States’ local taxation rules. If desired, EEE & TTT sub-sections might also be created for alignment with other Member States, as demand arises. Obviously, the tax regime applicable to any PEPP participant is based on the participant’s tax residency, as is the case for all retirement products today, backed up by the rules of existing Double Taxation Agreements.

Default Investment Option: Two possibilities are now on the table:

A nominal ‘guarantee on capital’, to cover at least the contributions paid (net of fees and charges) as a minimum, which can be extended by the PEPP provider to include inflation protection.
An ‘investment strategy directed at ensuring capital protection of the saver on the basis of a risk mitigation technique’ – more simply known as a life-cycle approach

The opinion of the FEPI is that the PEPP framework should allow for both of the above, if necessary shaped at a local level, according to national rules or custom. As detailed in the FEPI position paper, the guarantee on capital should be real (not nominal). In addition, there is merit in using life-cycle investing as the basis for a default option for retirement planning, even for investors that may have a more cautious attitude to investment risk, depending upon the time horizon of the investor.

Decumulation Options:
Whilst a single regime for the PEPP would be ideal in terms of simplicity and portability, it is understood that this could present issues for Member States if, for example, this resulted in the PEPP being granted a more favourable treatment than a local Personal Pension Product (PPP). Likewise, if a local PPP had more favourable treatment than the PEPP, this would serve as a deterrent for someone investing in a PEPP.

Therefore, the general consensus of the FEPI is that within the framework of the PEPP, decumulation options should be broad, covering all potential pay-out variations, allowing for PEPP providers to shape the PEPP according to local rules.

Notwithstanding the above, the more complex the product, the greater the costs of administration, which will directly impact on the investment returns to the consumer and so an appropriate balance must be found.

Distribution & Advice:
It is arguable that PEPPs should only be sold on an advised basis, even if the saver has chosen the default investment option – whether this be a real capital guarantee or a lifecycle investment option. The impact of national pension entitlements, varying decumulation options and retirement ages, particularly if the PEPP saver has cross-border accumulated benefits, strengthens the need for the PEPP saver to receive appropriate advice, regardless of the amount being saved.

At the very least, the requirement for an appropriateness test should be a pre-requisite in all situations, as a minimum level of saver protection is always necessary. Decisions concerning pension products are numbered amongst the most important that each saver is expected to make in his/her life.

The question now is will the Trilogue be able to reach a consensus on the PEPP that is acceptable to all stakeholders?

Due to the importance of the PEPP, a round table will take place at FECIF’s forthcoming Annual Conference taking place on Wednesday, 17th October 2018 at the Renaissance Brussels Hotel, Belgium. This is a major event and, amongst other issues, will address two significantly important and relevant areas:

Personal retirement planning across the EU, not least the Pan-European Pension Plan
The rise, development, importance and future role of Fintech

The event will ask, and look to answer, numerous key questions, such as: how can we stimulate private pension provision and motivate consumers to take personal responsibility for their financial futures; can the PEPP provide a solution and is a truly pan-European pension possible; can Fintech assist in these areas and, if so, how?

Speakers and participants will be key individuals from EU regulatory bodies and consumer associations, academics and MEPs, as well as numerous major industry figures.

This article first appeared on FECIF website

Daphne Foulke is the Chairperson of FEPI, Board Member of FECIF and Partner at The Spectrum IFA Group

Exchange of Information – CRS

By Chris Webb
This article is published on: 30th August 2018

30.08.18

It surprises me that today I am still meeting with people who are blissfully unaware of the global exchange of information, or common reporting standards, that started back in January 2016, with the first actual exchange of information taking place in 2017.

Why am I surprised? Well, for starters, I meet with and hear of people who still attempt to keep their assets under the radar of the relevant tax office, in the belief that if they haven’t declared it or aren’t actively using the asset it won’t appear on any tax or government system.

In Spain, this immediately brings the Modelo 720 reporting requirement to mind, but that’s another topic, which I have already written an article on and which can be found on our website. The CRS is bringing AUTOMATIC exchange of information to the table…

Ultimately, this means that it is now more important than ever to make sure you have reported and are declaring income and assets in the right country.

From January 2016, financial institutions in around 50 countries began collecting information on their clients and their accounts. The purpose of collecting the data in 2016 was to share it with the client’s country of residence in 2017, which was the start date for the actual sharing.

This is not a one-off thing; the exchange of information will be repeated every year, and every year more and more countries are joining the group. According to the Gov.UK website another 53 countries started collecting the information in 2017 to report it in 2018, and in 2018 another 4 countries will begin the process and fulfil reporting to the relevant authorities in 2019.

Looking at the list here: https://www.gov.uk/guidance/automatic-exchange-of-information-introduction you will see that most countries of any relevance to the majority of us are listed. Refer to the note relating to the US as the US exchanges information globally under its FATCA initiative – the Foreign Account Tax Compliance Act.

In fact, I only know of one person who could possibly be in the section where no agreement is in place… yet.

It is important to note that this is a regulatory procedure and there are no choices. It is carried out under the Common Reporting Standard (CRS), developed by the Organisation for Economic Co-operation and Development (OECD).

Quite simply, this means that there is nowhere to hide anymore; this loss of financial privacy affects us all. If you live in one country and have assets in another, your information WILL be shared between countries. Your local tax authority will automatically receive information on the financial assets you own overseas.

One potential client fully believes that this will only happen if your tax affairs are being investigated or if the tax office is querying a specific asset. This is not true, they do not have to request the information because they will receive it automatically.

As an example, if you are a tax resident in Spain and have bank accounts in the UK and investment portfolios in the Isle of Man, the Hacienda will automatically receive the information on these accounts / portfolios from the tax authorities in the countries where the assets sit.

You will probably have noticed that your banks or financial institutions, from outside your country of residence, have been sending you forms to complete to confirm your tax residency. This is a legal requirement on their part. Even not returning these forms doesn’t help you as they will simply assume you are still a resident of the country that you last registered with them, therefore will still report to that tax authority.

The information they will be sharing about your financial assets includes personal data such as your name and address, country of tax residence and tax identification number. They will also be reporting information relating to your accounts such as account balances, investment income, interest earned, dividend payments, income from certain insurance policies and any proceeds from the sale of assets.

As you will have seen above, this sharing / reporting requirement is now firmly in place. In September 2017 the first jurisdictions exchanged their data. Importantly for my clients this list of Jurisdictions includes the UK, Spain and most other EU countries. It also includes the Isle of Man, Jersey and the Cayman Islands which were, historically, places people looked at when placing their financial assets.

Hopefully you can see the importance of understanding exchange of information, or CRS. Think about the complications that could arise… When the local tax office receives information about your assets or income abroad, they will automatically be able to cross reference whether you have accurately reported total global income on your tax return.

For residents of Spain it has taken the Modelo 720 reporting requirement to another level. The Hacienda will now be able to compare the data they are given with your Modelo 720 declaration. In my opinion, it makes the Modelo 720 redundant, BUT it is still a legal obligation to file it!

Tax residents of Spain are liable to pay Spanish tax on their worldwide income, gains and wealth. This includes most income which is also taxed elsewhere, although double taxation agreements mean you aren’t taxed twice. It is still a common misconception that if you have income taxable in the UK then it doesn’t need to be declared in Spain. I can’t reiterate enough how wrong this is. Even if you have made a tax declaration in another country you still need to make the declaration in Spain.

If you haven’t been doing this, I strongly recommend that you regularise your tax affairs as soon as possible. This would also be the right time to look at all your financial affairs.

Most people I meet have several bank accounts and sometimes several investment portfolios and products. When asked they don’t really know why they are set up the way they are, it has just been that way for years. Streamlining your financial affairs can ease the administrative burden now and certainly later in life.

Living in Spain makes it even more important to review your financial assets. What may be “tax free” in the UK is not necessarily “tax free” in Spain.
Are your financial assets approved here in Spain? You probably wouldn’t know unless the differences had been explained to you.

In Spain we have what are deemed compliant products. If you have a compliant bond you will find it is EU based; if you discover your financial solution is based in The Isle of Man, Jersey or Guernsey it is deemed non-compliant. This isn’t meant to be confusing; they are not illegal, but they must be reported to Hacienda and please note that they are taxed differently to a Spanish compliant bond.

The Spectrum IFA Group will only ever recommend a solution that is compliant and tax efficient in your country of residence. In Spain we will not recommend solutions outside of the “approved area”. This is for your benefit!
For a free, no obligation review of you financial assets please get in touch at chris.webb@spectrum-ifa.com or 639118185. If you are in the Madrid region I will personally meet with you, if you live in any other part of Spain OR Europe let me know and I can put you in touch with our local office there.