Creating THE Folder…

By Jeremy Ferguson
This article is published on: 18th February 2019

18.02.19

It was only recently I wrote about the fact we are all living longer as a result of improved lifestyles and medication, and the lovely Spanish lifestyle we are all enjoying.

The point I was making is how it is all very relevant to our finances and how we best manage them. But what if you are the one who tends to manage the family affairs and finances: are you confident that all of the papers and documents you hold are not only all in order, but equally as important, somewhere where they can be found and easily understood in the event of your demise? I am aware of many couples who would not know where all of the important documents relevant to their lives are. It is all down to who normally runs the financials, and that can the husband or the wife.

We all spend time every year making sure the ITV for the car is sorted, house insurance and car insurance policies are up to date, tax returns are filed etc. How about putting some time aside to create ‘ THE Folder’ as I like to call it?

So what is THE Folder?
It is a single file (digital or physical) where you keep all of your important personal and financial information together. It allows easy access to these documents in the event that you are no longer around to help. It is really important to have it in place when one family member takes the lead on the family finances; this includes paying bills, managing accounts and storing documents. Even if that is not the case, it is an important exercise.

So what should be in THE Folder?
All documentation that is relevant to running your household with regards to finances, such as:

Birth, marriage and divorce (if applicable!) certificates
Bank account details, including online login details
E-mail and social media account details and logins
Life assurance policies
Funeral plan policy
Pension documentation and statements
Investment documentation and statements
Wills
House ownership deeds

THE Folder can be very simple, and I always suggest contact details for each of the relevant policies etc. should be clearly marked as well. Also, make sure that when THE Folder is complete, you sit down together and explain all of the information it contains, as it will be as useful as a chocolate tea pot if you don’t both know exactly what is there.

Is it worth the effort?
Well, I think it is worth the effort. At a time of loss it can be stressful enough, without having to try to piece together the deceased’s financial affairs. This can be a really difficult time for family members, even more so if your support network, typically children, is back home in the UK.

However, preparing THE Folder is much more than just avoiding stress; if you leave behind an administrative nightmare, you could delay access to inheritors’ funds and potentially cost a small fortune in legal fees.

To give you an example of this, the UK Department of Work and Pensions estimates that there is currently more than £400 million sitting in unclaimed pension pots in the UK.

Which is best…..physical or digital?
This comes down to personal preference. It can be done by either creating an electronic file that survivors can access in the event of death, or an actual paper file. An electronic file can be stored on your main computer, in the cloud or on an external hard drive. Make sure everyone knows how to access the computer, cloud or hard drive though!

Alternatively, if you use a physical folder to keep all of the important information together, make sure it is large enough to keep everything together. The good old shoe box has been a long time winner in this department, although a well organised file does make life a lot easier for everyone.

For what it’s worth, I find lots of people prefer paper and are happier with hard copies of everything. I personally prefer digital, which I have shared with some trusted family members. It may even be worth considering asking your legal advisers to hold the folder on your behalf (electronic is much better for this reason), so a simple visit to them if anything happens means they can assist you far more easily with everything.

Typically they will want all of the information it contains anyway, so by saving time when it becomes relevant, the small annual charge they may make for holding the information will normally be offset.

How often should THE Folder be reviewed?
It is sensible to note the date that it was last reviewed, so that anyone using it has an idea of how up-to-date the details are, and then going forward, reviewing the file on an annual basis should be sufficient, or of course, whenever a significant change occurs which you consider materially important.

And finally…
I have already stressed this, be sure to tell someone about it! There is little point going to the effort of creating such a folder if no one knows of its existence or where to find it…..

10 Rules of Successful Investments

By Robin Beven
This article is published on: 15th February 2019

15.02.19

Successful long-term investment is not just about buying low and selling high – although that is always a good principle to bear in mind.

Share prices can be susceptible to unpredictable external factors ranging from political newsflow to the weather, which can lead to investing – particularly during times of high volatility and uncertainty – feeling a bit like negotiating a minefield.

One way to make sense of such a potentially confusing world is to go back to basics – markets may rise and fall but the rules of sensible investment remain constant.

Buy what is right for you
Just because an investment works well for somebody else does not mean it is necessarily right for you. Consider your own situation – your future liabilities, your investment goals,
timeframes and, most importantly, your appetite for investment risk be it lower, medium or higher – and then make your decision.

Diversify
Spread your risk by diversifying your portfolio across a mixture of asset classes, industry sectors and areas of the world. If you put all your money into a single asset class,
sector or company, your portfolio becomes vulnerable and performance is likely to be volatile. However, mixing it up means that, when the value of one asset is falling, another
might be rising and so could help to compensate towards your expected returns.

Never buy what you do not understand
History is littered with funds that promised a great deal but when faced with pressure from the market, collapsed with all those promises broken. Some shares or funds might sound
very exciting – and perhaps straightforward – but if you do not really understand exactly what the company does or how the fund works, steer clear.

Do not become emotionally attached
It is wonderful if a holding has worked for you, but you do not have to feel too attached – the share or fund does not know you own it. You should look at every existing investment with the same clear-headed objectivity as you did before you bought it – and, when it is time to sell, do so with a clear conscience.

Be your own person – do not follow the herd
Many investors became caught up by the euphoria that surrounded the ‘dotcom’ boom of the late 1990s, simply because everyone else was excited and they did not want to miss out. Consequently, they bought into companies that promised much and delivered little or nothing. It is hard to swim against the current but always take a step back and consider not only what you are buying but why. There are a number of “multi-asset” funds in which to invest and are a good starting place for most. These offer a blend of equities, bonds and cash that are managed for you by very large institutions and cover most investment risk parameters.

Review your portfolio regularly
Your portfolio should have been constructed to meet objectives based on your existing needs and your goals for the future. However, over time, your needs and circumstances can change – as indeed can the markets – and your portfolio may require the odd tweak to make sure it keeps up. Review it regularly – perhaps every one to three years – and make sure
it stays on track.

Do not believe everything you read or hear
Headlines on television and in the newspapers can initially be just as misleading with regard to finance and investment as they are to, for example, sport or celebrity gossip. Try not to
be distracted by day-to-day ‘noise’. Instead, make sure you keep a clear head, remain focused on your objectives and take advice from a qualified professional to ensure you are making the most of your investment portfolio.

The long and complicated relationship with social charges

By Katriona Murray-Platon
This article is published on: 12th February 2019

12.02.19

Most people accept that when you live in a country you have to pay local taxes. Equally, most people can understand the fact that in order to get social benefits such as unemployment benefits and healthcare, you have to pay social security contributions. France, on the other hand, has another tax: social charges, which isn’t actually called a tax, but in fact operates very much like a tax.

Social charges were first introduced in 1991 and have been much grumbled about by French tax payers and expats living in France. It is not one social charge, but is made up of various types of social charges, the rates and combined rate of which has increased progressively over the years. Social charges are taken from all types of income, but where they have caused the most problems is the social charges on capital and rental income, especially for non-resident tax payers.

In 2015, following a challenge by a Dutch national, Mr De Ruyter, the European Court of Justice held that the social charges on rental and capital income were not a tax but a social security contribution and that an EU national should not be required to pay social charges in France when they are paying or have paid social security contributions in their own Member State. The French Administrative Court, the Conseil d’Etat then confirmed that decision and orders were issued to the French tax offices to reimburse the social charges paid to non-resident EU nationals or resident EU nationals who were covered for their health insurance by another EU system (under the S1 form, for example). This led to hundreds of thousands of pounds being reimbursed for the tax years 2012, 2013 and 2014.

In an effort to resolve the problem of the drop in funds being collected, in 2016 the French government changed the allocation of the social charges from rental and capital income so that they were no longer paid to the social security body, but to the Old Age Solidarity Fund and the Social Debt Depreciation Fund. Therefore, claims could not be made on income earned in 2015 taxable in 2016 or on capital gains from 2016 onward. This was a bit of last minute shuffle to seemingly comply with the European judgment, however the legal grounds of this abrupt turnaround were questionable.

On 31st May 2018, the Nancy Administrative Court of Appeal held that even these social charges should not apply to those covered by another EU Member State social security scheme. This meant that the major part of the social charges (14.5%) should be refunded. Although this decision has been referred to the European Court for a ruling and has yet to be confirmed by the Conseil d’Etat, claims for 2016 and 2017 should be made now to avoid being time barred later (2015 is time barred as of 31st December 2018).

Whether or not it is because the French government is expecting the European Court of Justice to rule against them again, the Law on Social Security Financing of 2019 has now entered into force, stating that tax payers who do not rely on the French social security system for their healthcare, but on a healthcare system of another EU Member State, Iceland, Norway, Lichtenstein or Switzerland, are exempt from the CSG and CRDS on capital and rental income. Social charges in general have been reorganised so that, as of 1st January 2019 there are only the CSG and CRDS. However a new social charge has been introduced called the “Prélèvement Solidaire” at a rate of 7.5%, which means that the total amount is the same as last year at 17.2%. Under the Social Security Financing Law of 2019 those not reliant on the French State for health cover, as described above, only have to pay this 7.5% social charge.

An Order published on 7th February 2019 by the French parliament on the situation of Brits in France in case of a No Deal Brexit has stated that all current healthcare arrangements would be maintained for a period of 2 years following the Brexit. Although this is good news, it is subject to the UK reciprocating the same rights and guarantees.

Whilst no one knows what the final Brexit outcome may be, it would still be worth getting in touch with a financial adviser to review your investments and see how you can benefit from these new tax changes.

BRANCH 23 – Tax Efficient Investment In Belgium

By Spectrum IFA
This article is published on: 11th February 2019

11.02.19

While you are living in Belgium, you have a number of valuable investment options available to you. If you wish to maximise tax efficiency, Branch 21 or Branch 23 products are very attractive. These are life insurance products widely used in Belgium for saving and investment. While Branch 21 can provide security through guaranteed returns, Branch 23 offers access to a wide range of assets which can provide you with excellent long-term capital growth.

Branch 21 vs Branch 23
Branch 21 products provide the investor with a guaranteed return (at the time of writing, between 0.1% and 1%), with a possible bonus. However, the bonus is not guaranteed and is dependent on the insurer’s terms and conditions. This solution is popular as a pension strategy, but crucially the effect of inflation should always be taken into account when calculating the real rate of return.

By taking out a Branch 21 policy, you qualify for tax relief, which can mean a tax saving of up to 30% on the amounts invested. Currently you can invest up to €980 per year and receive tax relief on it. You can invest more, up to €2,350 per year, in the long-term savings system.

A Branch 21 policy can have a fixed term of, say, ten years, or it can be open-ended. An open-ended policy ends when the policy is surrendered, or on the death of the life assured. You are also able to take out additional guarantees, such as death or disability cover. Note that as this is a life insurance policy, there is a 2% tax on premiums unless it is a pension savings insurance policy.

If Branch 21 is the no-frills option, then its sibling, Branch 23, is the all singing, all dancing alternative that offers broader investment scope and the prospect of higher returns (with of course the increased risk that comes with foregoing a guaranteed yield). A Branch 23 policy can invest in a wide range of assets including:

1. International, multi-asset mutual funds
2. Discretionarily managed portfolios
3. Active or passive investments

Importantly, there is no maximum investment in a Branch 23 product, and for larger amounts you can also access personalised, discretionary investment management.

Returns will vary, depending on market conditions, your attitude to risk and the length of time you remain invested. With the help of a financial professional, you have the opportunity to design a portfolio to suit your personal circumstances, maximising potential returns whilst managing and understanding the principles of investment risk and reward.

The time horizon is key here ie. how long before you envisage needing access to your money. You should not be investing in a portfolio like this unless you have a time horizon of at least 5 years.

Tax efficient investment
As mentioned previously, these solutions are very tax efficient. A 2% tax is payable on premiums if it is not a pension savings insurance policy, but in addition to up to 30% tax relief enjoyed by Branch 21 investors, you will not have to pay withholding tax (based on a notional return of 4.75%) if you leave your funds invested for at least eight years. If you did not received a tax benefit on the premiums, then there is no tax to pay on the money that has accumulated.

With Branch 23, you still pay 2% on your premiums (like Branch 21), but you do not pay a withholding tax on your investments unless it has additional performance guarantees (for example, from structured products). In that case, the withholding tax will then be calculated on the actual return and not a notional 4.75%.

Other than that, there is no tax to pay on the final amount, or on any withdrawals.

Furthermore, these products can also be very useful when it comes to estate planning, since the beneficiary and the life assured do not necessarily have to be the same person. Let’s walk through an example: a parent wishes to gift a substantial amount of money to their child. The child can be designated as the beneficiary of the policy and the parent as the life assured. At the time of the parent’s death, no inheritance tax is due if the parent passes away at least three years after gifting the sum of money to the child (the beneficiary). This is a straightforward and reliable way of ensuring that your wealth is passed on to the people you care most about, without them having to pay inheritance tax on the bequest.

Additional benefits
On top of tax efficiency, estate planning opportunities and the freedom to invest in a wide range of international, multi-asset funds, if you have existing investments these can also be transferred into your Branch 23 policy, with flexible access when you need it.

How Expats Can Consolidate Their UK Pensions

By Craig Welsh
This article is published on: 8th February 2019

08.02.19

Very often we are contacted by expats who have several different pension schemes, and usually they are scattered around different countries. Of course, in an ideal world pensions would be MUCH easier to keep track of, but unfortunately efforts to ‘harmonise’ pensions across the EU haven’t made much headway. Pensions are inherently linked to the taxation system of that particular country (because you usually get tax relief on the contributions you make) and so it can be very difficult to consolidate them or even move your ex-employer’s scheme to your new company scheme.

The good news is that this CAN be done with UK pensions. So, if you are an expat who has previously worked in the UK, you can consolidate them all into one pot. That ‘pot’ can be either be left in the UK, using what is known as an ‘International SIPP’, or taken out of the UK using a QROPS (Qualifying Recognised Overseas Pension Scheme).

Both the SIPP and the QROPS route can offer excellent flexibility when it comes to taking benefits, as well as very favourable estate planning opportunities (being able to pass on the full value of the ‘pot’ upon death, for example). More on that later.

BUT!
There’s a but, of course. It’s not suitable for everyone and it depends on a host of different factors. Moving any pension requires regulated advice from suitably qualified and licensed advisers. There is a proper process to go through, a process which is designed to ensure that you only transfer if it is clearly in your best interests to do so. Indeed, if you are considering moving a defined benefit (final salary) pension scheme then extra care should be taken as you will be giving up a guaranteed income, and you may find that you will need advice from two advisory firms. The regulated process is there for your protection!

Everyone’s situation is different of course, and a licensed advisory firm will look at your financial situation as a whole. But here are some general rules of thumb;

A QROPS may be suitable for you if all of the following applies to you;

You have UK pension schemes with a total transfer value of over £100,000
You have left the UK and do not intend to return
You live in the EEA (European Economic Area) and you don’t intend to leave in the next 5 years*

*An OTC (Overseas Tax Charge) was introduced in 2017 which means a 25% tax charge would be applied to a transfer unless both the new pension scheme AND the pension scheme member are based in the EEA (or both are in the same country).

An International SIPP may be suitable for you if all of the following applies to you;

You have UK pension schemes with a total transfer value of over £100,000
You have left the UK but there is a chance you will return
You are unlikely to be affected by the LifeTime Allowance (LTA)** of £1,030,000. If this is likely to be an issue for you, QROPS should be considered

**the LTA is the overall limit of tax-privileged pension funds you can accrue in the UK, before a Lifetime Allowance tax charge applies.

What are the benefits of consolidating?
What next? As I said before, transferring a pension requires regulated advice from suitably qualified and licensed advisers, and a full assessment needs to be carried out. If it is established that a transfer is indeed in your best interests, what can a QROPS or International SIPP offer you?

Well, both can provide you with;

- Flexi-Access. From the age of 55, a 25% lump sum (in some cases 30%) is available (tax-free in the UK but take care as it may be taxable in your country of residence). Thereafter you have the option of flexible drawdown (taxable income). This means you choose when you start taking your income, and you can vary how much you want to take

For those with defined benefit / final salary pensions, this can mean turning the promise of a fixed income for life into a large pot of capital you can access flexibly.

- Control of the Investment Pot. You are not giving up your savings for an annuity; the ‘pot’ is invested, and you can control how it is managed, according to your risk profile
- Currency Choice. Even with the International SIPP option, you can change the currency of your assets from Sterling to Euro. We had clients who took advantage of this a few years ago when the rate was €1.39 to £1, and now they’re pretty glad they did!
- Estate Planning. The pot can be passed on to your beneficiaries on death. With a QROPS the whole pot can be passed on free of tax, while the SIPP (as it is still a UK product) will be taxed at the recipient’s marginal rate only IF the deceased was aged over 75

This can be a real game-changer if you have a large defined benefit / final salary scheme, which typically offers a spouse’s pension of 50% on the death of the member. For example, I have seen many cases where it meant turning a guaranteed income for the surviving spouse of £10,000 per annum into a potential lump sum of over £500,000. Tough choice!

Lifetime Allowance. In the UK, pension savings of over GBP 1,030,000 are taxed at either 25% or 55%. Once a QROPS has been used however, the LTA no longer applies. So, if you are anywhere close to the LTA, a QROPS should be considered

Elephant in the Room
I have deliberately not mentioned the B-word; Brexit! That’s because at the time of writing, with only 50 days until the UK is due to leave the EU, we are still no clearer as to whether the UK will leave with a deal, without a deal, or will leave at all.

The current opportunities for expats to consolidate their UK pensions may well be at risk depending on the outcome of Brexit. The rules could be changed; we just don’t know. So, it’s advisable to act now before any doors are closed.

At Spectrum we offer a free initial analysis of your UK pensions by our highly qualified advisory team, as well as our ongoing advice on portfolio management and the various retirement options. You can read some feedback from existing clients here

We are all living longer, and it’s not all good news

By Jeremy Ferguson
This article is published on: 5th February 2019

05.02.19

When it comes to the way in which we are leading our lives, the world in which we live has changed significantly over not that many years.

Do you remember starting the day off with a bowl of cornflakes smothered in processed sugar and full fat milk, followed by a couple of slices of white processed bread smothered in butter and marmalade (laden with sugar), then washing that down with a couple of cups of strong coffee before we rushed off to work? Then at work the stresses of the day were broken by coffee to keep you going, with a packet of sandwiches and a bag of crisps at lunch time. A sneaky stop off on the way home for a couple of pints for some, then dinner followed by bed. Sound familiar?

Through a combination of increased awareness of the dangers of processed food and sugars, non-stop articles and TV programmes warning us of health issues; people are becoming increasingly health conscious. Add to that the mass of personal trainers and nutritionists out there, and people nowadays are more active and much more aware when it comes to healthy eating and lifestyle.

If you are reading this, you probably made the decision to move to the south of Spain some years ago, and boy, how things have changed as a result. Longer days, constant sunshine, lovely salads, a relaxed life, and probably a lot more time spent outside walking, or for many, playing golf or tennis. Oh yes, and the big one, much less stress!

This is all resulting in something that is causing massive issues around the Globe for all sorts of reasons. People are living longer and needing more medical help along the way, because, despite being generally healthier now, older people still have more health issues than younger people. With that comes an ever increasing stress on healthcare systems. The ageing population also means that the ratio between retirees and workers is swinging in a way that means less taxable income is there to help fund the ever increasing medical needs.

So, while it is great we are all living longer, and therefore having a longer and healthier retirement, how much attention are we paying to this fact with regards to financial health? The pension pot and savings pot we hope you have accumulated now has to last for an ever increasing length of time. Have you considered the need for adequate medical insurance before it is too late to be accepted as a client (because you are too old)? Inheritances may be left to you at a much later stage of your life, and when they are, they could also be smaller due to the fact your parents lived so much longer.

In summary, it is really very important to spend time considering all of these factors. How many of us actually look at this in detail, with an honest reality check regarding the years ahead?

One of the things I like to do with my clients is to make sure we look at the big picture, assessing what you have and how long it is likely to last. Should you be putting the brakes on the lifestyle just a bit for that added longevity financially, or are you being too cautious? It is amazing the amount of couples I meet who are being too careful with money. Or have you got it just about right?

What happens if inflation rises or falls, or the money you have invested loses value or, hopefully, makes more than you expected? Oh yes, and what happens to your income when exchange rates move?

It is always said that you cannot buy time, but strangely enough, most clients I meet here in Spain look a lot younger than they actually are, so in my view, they all seem to have managed to do just that, aided probably by all of the things we know are good about living here. So, if by talking we can remove a little more stress by getting all of those financial ducks in a row, then maybe you can cheat the grim reaper for a good many more years to come.

The PAYE system – and so it it begins!

By Katriona Murray-Platon
This article is published on: 4th February 2019

04.02.19

Earlier last year I wrote about France’s plans to bring in a PAYE system as from 1st January 2019. Now that we are in January, we can see the effects of this new system. French pensioners and employees may have had the tax deducted from their salaries/pensions in December 2018 if the payment was made 1st January but for many people the effects of this new system will appear by the end of this month. Self-employed business owners, landlords and those with foreign sourced income will have to make monthly or quarterly tax payments. The difference with the previous system is that last year your quarterly or monthly payment was to pay towards your income tax for 2017 paid in 2018 whereas this year the payments are not for the 2018 tax but for the 2019 tax only.

If you go onto your account at impots.gouv.fr you can go into the menu for “gerer mon prélévement à la source”. This will show you your joint rate, if you and your partner chose one, or your individual rates. For those receiving French pensions and on French payroll, you will see a percentage of how much will be deducted from the income after social charges (so the “net imposable”). Going forward you will be able to see how much and when the tax was deducted. The applicable rate already takes into consideration the 10% tax abatement on salaries and pensions.

The main advantage of this new system is to allow the tax payer to inform the tax office of any changes to his personal situation such as a wedding, a divorce, a birth or death. In the “Gerer mon prélevement à la source page” you can declare any changes to your personal situation, change your tax rate or increase your tax payments. For those paying tax monthly or quarterly, you can change the frequency of your payments to monthly (if you paid quarterly) or to quarterly.

If your income has significantly decreased or the applicable rate is too high you can easily inform the tax office via the website. For French pensions and salaries, if the tax is reduced by more than 10% or 200 euros per year, the tax office will change your tax rate and inform your employer or pension provider within 1-2 months. The rate for income that is not taxed at source was calculated on the income declared for 2017. This amount, after the applicable abatement, was then divided into 12 monthly payments or 4 quarterly payments.

The annual tax declaration must still be completed between April and June. This declaration is to allow you to declare any income that is not taxed at source, any allowable expenses and any tax reductions or credits. The tax rate or amount will be adjusted once the tax return is completed in May 2019 and the tax calculation is carried out in September 2019.

Those receiving tax credits (home help, child care, etc) will have received an advance payment into their bank accounts in January. There will be an additional tax credit when the tax is calculated in September 2019 which will cancel some of the tax payable 2018 to avoid people paying 2018 and 2019 all in the same year.

Capital income is not taxed at source. They are subject to the set rate of 12.8% unless the marginal rate has been opted for. Assurance vie payments will be taxed according to the rules in place when the policy was set up. All assurance vies set up or topped up after 27th September 2017 and/or under 150,000 euros, may be taxed at the 35%, 15% or 7.5% rates as before or the marginal rate, in addition to the 17.2% social charges.

If you have recently arrived in France, there will be no tax to pay until you complete your first tax return between April and June of this year. You should make sure that you get your French tax forms early in April, do not expect them to be sent to you. You will not be able to complete your tax return online so you will have to file a paper return.

Whereas the French tax rules were complicated previously, even though this new system is designed to simplify things, it is going to take a while to get used to. For complete peace of mind, it is best to get in touch with a good financial adviser who will be able to carry out a free financial review and assist you in making the best tax efficient decisions.

French Tax Changes 2019

By Sue Regan
This article is published on: 31st January 2019

31.01.19

2019 has brought a number of changes to the French tax system. Below is a summary of the principal changes affecting personal taxation.

INCOME TAX (Impôt sur le Revenu)
There has been no change to the rates of income tax of the barème scale, but the tax bands have been increased as follows:

Income	Tax Rate
Up to €9,964	0%
€9,965 to €27,519	14%
€27,520 to €73,779	30%
€73,780 to €156,244	41%
€156,245 and over	45%

PAYE (Prélèvement à la Source)
PAYE has been introduced in France with effect from 1st January 2019.
The types of income subject to PAYE include:

Income from employment
Retirement income, including UK private and State pensions, but excluding certain pensions where tax is already deducted at source, such as UK Civil Service pensions
Rental income, including that from French properties owned by people who are not resident in France.

For French source income, the employer or pension provider will deduct the tax at source.

Clearly, where income is generated from outside of France there can be no deduction at source by the French authorities. This means that many expatriates living in France will be subject to a monthly withholding tax on their income. Therefore, starting in January 2019, the tax authorities will collect a sum equal to 1/12th of the tax paid in 2018 (based on income declared for 2017).

Excluded from PAYE is investment income, such as bank interest, dividends, capital gains and gains from life assurance policies.

New residents of France who have not yet submitted a French tax return, will have the option of paying a sum ‘on account’, or be taxed in May 2020, following submission of their first tax return.

Everyone will still be required to submit a French tax return in the May of the following year. Thereafter, the final assessment of tax liability will be carried out, and you will either receive a tax refund or be required to pay any additional tax due, over a four-month period.

If you do not currently pay any income tax, you will not be required to pay provisional monthly payments. Similarly, if you anticipate a significant change to your income during the course of the year you can request that the tax authority alter your tax code. However, if you do so, and your income is 10% greater than advised, you could face a tax penalty of at least 10%.

REFORM OF SOCIAL CHARGES (Prélèvements Sociaux)
Some changes have been introduced to certain social charges, which is good news for some taxpayers.

The main rates for social charges remain the same as for 2018, i.e.:

Source of income	Rate
Pension	9.1%
Investment and property rental	17.2%
Employment	9.7%

Social Charges on Pension Income
The exemption from social charges on pension income still applies if you hold the EU S1 Certificate or if France is not responsible for the cost of your healthcare.

However, those pensioners who do not satisfy the exemption conditions above, but whose pension income is less than €2,000 per month (or €3,000 for a couple), will now pay a lower rate of 7.4% on pension income.

Social Charges on Investment Income and Capital Gains
From 1st January 2019, individuals covered under the health care system of another EU or EEA country are no longer subject to the existing rate of 17.2% on investment income or capital gains. Instead they will now pay a new flat rate of 7.5%. This new flat rate is known as the ‘Prélèvement de Solidarité’ and represents a saving of 9.7%. It applies to investment income, such as property rentals, bank interest, dividends and withdrawals from ‘assurance vie’ policies, and capital gains realised by both residents and non-residents of France.

In summary, taxpayers can benefit from the new 7.5% rate on investment income if:

They hold the EU S1 Certificate
They are a non-resident of France earning French source income (i.e. rental income, capital gains on the sale of a French property, etc) and are covered by the health system of another EU or EEA country

ASSURANCE VIE
There are no changes to ‘assurance vie’ apart from the social charges reform detailed above which will benefit some policyholders.
For policies held for more than eight years, the annual allowance remains at €4,600 for individuals and €9,200 for married/PACS couples.

This outline is provided for information purposes only based on our understanding of current French tax law. It does not constitute advice or a recommendation from The Spectrum IFA Group to take any particular action to mitigate the effects of any potential changes in French tax legislation.

If you would like to discuss how these changes may affect you, please do not hesitate to contact your local Spectrum IFA Group adviser.

Récapitulatif sur le MODELO 720

By Cedric Privat
This article is published on: 25th January 2019

25.01.19

Qu’est-ce que le Modèle 720 ?
En 2013, le gouvernement espagnol décide de s’attaquer à la fraude fiscale. Il met alors en place un certain nombre de mesures.

Visant en priorité les nationaux espagnols, cette réforme affecte également les étrangers vivant et/ou travaillant en Espagne disposant d’un patrimoine en dehors de la péninsule Ibérique.

Le Modèle 720 est une déclaration informative mais obligatoire sur les biens et avoirs à l’étranger.

L’objectif de cette démarche est de disposer d’informations sur:
– les comptes bancaires situés à l’étranger
– les titres, droits, assurances-vie et placements gérés ou acquis à l’étranger
– les biens immobiliers et les droits sur les biens immobiliers à l’étranger
Ce formulaire dûment rempli doit être présenté entre le 1er janvier et le 31 mars, uniquement par internet (via le site “Agencia Tributaria – Modelo 720 Declaración Informativa. Declaratión sobre bienes y derechos situados en el extranjero”).

Qui doit présenter le Modèle 720 ?
Toute personne physique ou morale résidant sur le territoire espagnol (plus de 183 jours par an), et uniquement si la somme de ses actifs est supérieure à la somme totale de 50 000€ dans une ou plusieurs des trois catégories.

Les années suivantes, il n’est demandé de représenter le Modelo 720 qu’en cas d’augmentation de plus de 20 000€ par rapport au capital initialement déclaré.

Quels sont les risques en cas de non-présentation?
Même si cette déclaration n’a pour but que d’informer, le gouvernement espagnol menace d’appliquer de lourdes sanctions en cas de non respect de cette mesure.
– 5 000€ pour toute information incomplète, erronée ou fausse, avec un minimum de 10 000€ d’amende par déclaration.
– 100€ par information, avec un minimum de 1500€, si la déclaration a été déposée au delà de la date limite.
– Si l’Hacienda se rend compte de l’absence de déclaration, les sanctions annoncées sont extrêmes (par exemple, 150 % de la valeur du bien, plus-values sur tout patrimoine non justifié)

De nombreuses plaintes ont été déposées afin de contester ces sanctions excessives et injustes, la commission européenne serait également en contact avec les autorités espagnoles sur ce sujet.

Néanmoins, il vous est fortement conseillé d’effectuer cette déclaration afin d’éviter tout problème avec Hacienda.

Plusieurs conseillers fiscaux francophones à Barcelone, dont je me propose de vous fournir les coordonnées, peuvent vous apporter leur aide pour remplir ce formulaire.

Je reste à votre entière disposition pour vous fournir tous renseignements complémentaires.

As a British citizen living in France who can look after my financial affairs if I become incapacitated?

By Tony Delvalle
This article is published on: 14th December 2018

14.12.18

There has been a huge rise in the number of lasting powers of attorney set up as dementia and Alzheimer’s have become the biggest cause of death.

Power of attorney arrangements allow an individual’s financial and health affairs to be looked after by someone else, the attorney, if they lose mental capacity in the future.

Several million “lasting” agreements have been registered since 2008, when they replaced “enduring” power of attorneys, amid concerns that the rules were too easy to abuse. There are two types of agreement – one covering finances and property, and another for health and welfare. Finance and property is far more popular.

The sharp rise in new agreements – which are set up on average when the donor is 75 – comes as the Office for National Statistics reveals deaths from dementia and Alzheimer’s accounted for almost one in eight deaths in 2015 – a total of 61,686 people – overtaking heart disease as Britain’s biggest killer. It is steadily on the increase.

Many people are still exposed as the majority of people have not appointed a power of attorney. It is possible for someone to take control of your financial or welfare decisions after an individual becomes mentally incapable, this can be a lengthy and complicated process with extra cost, which can cause distress at an already difficult time.

Without power of attorney, friends and family have to retrospectively apply to the Court of Protection and prove why they should assume responsibility. This process incurs court fees and can take up to 16 weeks, leaving money locked into accounts until a decision is made. Add to this an international dimension and it is certainly a complicated problem.

As a British citizen in France you can do either a UK lasting power of attorney or a French mandat de protection future. The choice between which one is best will depend where you intend to live now and the future and where is the main part of your estate.

Let’s look at the UK and French legal systems available in cases of incapacity. The two different types of lasting powers of attorney in case of incapacity in England are Health and Welfare, and Property and Financial, whereas in France there is only one the mandat de protection future.

UK Health and Welfare covers

Daily routine
Moving into a care home
Life sustaining treatment

UK Property and Financial covers

Managing bank or building society account
Collecting benefits or a pension
Selling their home

French Mandat de protection future covers all aspects of a persons financial and health well being.

1) As a British citizen living in France, which law would govern the administration of your estate in case of incapacity?
– French law will be applicable under the provisions of the Hague Convention

2) What does French Law use to protect people from incapacity? The Mandat de protection future is one choice and covers all aspects of a persons financial and health well being.
* Trusteeship
* Guardianship

3) Could you prepare for a physical or mental incapacity by appointing somebody you trust to administer your estate, pay your debts, manage your income in France?
Yes of course.

4) Would that power of attorney be applicable and enforceable abroad?
Yes it would be efficient in most countries and in 100% of the countries who ratified the Hague Convention such as England and Wales. In other words you could prepare a LPA or mandat de protection future and both should be applicable.

5) Does the French power of attorney have a limited scope? Can the attorney sign a deed of sale on your behalf?
a) Notarial mandate (notarial deed extend the power of the guardians up to the possibility of selling the estate)
b) Mandate not supervised by the Notaire (mere administration by an appointed trustee + the Judge)

So both are legal and which one is best for you may depend on a number of factors. What your assets are, where they are held and in what way, jointly, individually, what you want from them, inheritance planning etc.

The most important thing is to do something. Taking good legal and financial advice before you do to see what is best for you and avoid potential future problems when you least need them is imperative.