Le Tour de Finance – spring 2017

By Spectrum IFA
This article is published on: 7th April 2017

The final three Le Tour de Finance events of the spring season finished in La Roche sur Yon, Niort Bssines and Magnac sur Touvre. The venues for these past three events were spectacular bringing even more enjoyment to the days events for the attendees. The weather was sublime and the events were a huge success.

Thus far, Le Tour de Finance in 2017 is proving to be the most popular series of events ever. The seminars offer English speaking expats a chance to meet various experts from fields including; specialist expat independent financial advice, wealth management, currency exchange, QROPS/pensions and expat tax advice. The experts represent a range of international institutions giving attendees unprecedented access to ask those nagging questions about living as an expat in France.

Representatives from a wide range of international companies such as Tilney, SEB Life, Standard Bank, Rathbones, Prudential International, Momentum Pensions and AXA attend the events for a small presentation but more importantly, the events allow attendees to ask direct questions to these experts. This unprecedented access to the experts is what really sets Le Tour de Finance events apart.

The events will re-commence in June visiting the Alpes Maritime and Var regions. The events locations are Roquefort les Pins, Cabris and Frejus. Keep an eye open for events in France, Spain and Italy or contact us here to receive updated information on events in your region.

The objective of Le Tour de Finance is to provide expatriates with useful information relating to their financial lives. We try and cover frequently asked questions that we receive from our clients, however, it would be helpful for us to know what your particular areas of interest might be.

If you have any specific question please contact us here – Le Tour de Finance Questions

A sad time for some…….. whilst others embrace the change

By Sue Regan
This article is published on: 5th April 2017

05.04.17

Now that Article 50 has been triggered, the UK has two years to negotiate its exit. There’s been plenty of speculation as to what may or may not happen and how the Brexit process will work, but the truth is no one really knows. Whatever your feelings are about the historic event of 29th March 2017, it is clear that there will be changes ahead. However, for the time being we are all EU citizens governed by EU law, and as far as we are concerned, it’s business as usual.

And, for those of us resident in France, at this time of year, it’s the Tax Return (Déclaration des Revenus) that is at the forefront of our minds.

As in previous years, the deadline date by which the declaration needs to be submitted to the French tax authority varies by department. For 2017 (income received in 2016) the dates for on-line returns are as follows:

Departments 01 to 19 – 23rd May
Departments 20 to 49 – 30th May
Departments 50 onwards – 6th June

If this is your first income tax declaration in France, a paper return is obligatory and these should be available from your local tax office or to print off on-line from early April. There is a single date for paper based returns, regardless of where you live in France, which for 2017 is 17th May.

For those of you who came to live in France during 2016, then you will need to make your first French tax declaration and declare all your worldwide income and gains, but only for the period since becoming resident in 2016.

Income and gains that might be tax-free in another country, for example, UK ISAs, premium bond winnings and Pension Commencement Lump Sums, must be declared, as all are taxable in France. Even for income that is taxable in another country, for example a UK government type of pension (i.e. civil service, military, police and teachers pensions, but not State pensions) and/or UK property rental income, the amount must still be reported in France and it will be taken into account in calculating your French income tax. You will then be given a tax reduction to take into account the fact that the income is taxable elsewhere.

It is also obligatory to declare the existence of bank accounts and life assurance policies held outside of France, even bank accounts with nothing in them! There are large penalties for not doing so.

Common Reporting Standards
Hopefully, many of you will now be aware of the existence of the CRS, which has been in operation since 1st January 2016 (not least because you may have been asked by your UK bank, or perhaps the institution that pays your private pension, for your French fiscal reference number). This basically means that all EU fiscal authorities and many others throughout the world (including the popular offshore jurisdictions of Isle of Man, Channel Islands and Gibraltar) are exchanging information on pretty much all things financial, concerning taxpayers living in one country who have assets in another country and/or income arising in another country. This includes investment income (e.g. bank interest and dividends), pensions, property rental income, capital gains from financial assets and real estate, life assurance products, employment income, directors’ fees, as well as account balances of financial assets.

No-one is exempt and therefore, it is essential that when you complete your French income tax return, you declare all income and gains – even if this is taxable in another country by virtue of a Double Taxation Treaty with France.

Finally, if anyone finds that they need to complete the pink 2047 form, this means that you have foreign income and/or gains to declare. If this is for any reason other than pension income and earnings, then perhaps you may benefit from a discussion to see if your financial situation can be improved by investing in something that is more tax-efficient for French residency.

Spanish State Pension system about to go Bankrupt?

By Chris Burke
This article is published on: 4th April 2017

04.04.17

During 2017 or early in 2018, the Spanish State Pension system is due to run out of money. At one point, the reserve fund the government created for this was standing at 66 million Euros.
Why has this happened?
During the crisis, millions of jobs were lost, and with them, an almost parallel reduction in contributions to the Social Security. Furthermore, a large part of the new jobs are precarious – temporary, part-time or free-lance – and with low salaries. This means that contributions to the system are way below expectations and the minimum required for it to be able to meet outgoings with incomings.
While this has been happening, payments to retirees have been increasing. In the last 11 years the number of actual pensioners has increased by over a million (8.3 million up to 9.4 million). The average pension amount paid out has also increased, from €647 per month to €906 from 2006 to 2016. In 2007, 79 billion Euros was paid out in pensions, compared to 117 billion in 2016, an increase of 48%. In real terms, the annual deficit for the year is 19 billion Euros.
This issue of funding pensions is made even harder by the lack of people in employment. In many European countries it’s normal for 50% of the population to be in work, in Spain it’s only 40%.
Ideas on how to solve the problems being explored
These range from not putting a cap on contributions (this would generate more income in the short term, but mean more pensions payable in the long run). A more popular idea is to allow those people retired to still work and receive their entire pension, which would generate increased state contributions. Gaining more support is the change to stop those who are not contributing to the system to not receive state pensions/handout, such as widows and orphans. These would instead be funded from current tax revenues.
In essence Spain may have to look at what many other countries are changing, such as making people contribute for more years and lower percentages to effectively cut the average pension payments. As well as increasing Social Security contributions. But what does remain clear is, if you are ONLY relying on the state to fund your retirement, you could be looking at grave consequences.
To talk through what your retirement looks like, and what you can do to shape it, feel free to contact Chris.
(Source ‘The Corner’ Fernando Barciela)

What’s next for GBP versus EURO

By Gareth Horsfall
This article is published on: 29th March 2017

29.03.17

Whatever you think about Brexit and the effects it is having and the effects it will have I can’t think of a more sudden and bigger impact on most people’s lives than the depreciation of Sterling.

An approximate 20% fall in the currency since the heights of 2015.

Most people I know are able to accommodate this in some way, cutting back on the non-essentials and saving in other areas. However, if it falls further how will that affect us?

So, I thought I would do some digging around and contact some financial institutions to find out their opinion on the future of Sterling.

Let me start with a caveat to this article: Currencies are notoriously unpredictable. Most industry professionals accept that they can’t control them and have little ability to predict them. Predictions are about as effective as looking at ‘Il Meteo’ to see what the days weather is going to be!

HEDGE FUND MANAGERS
Whilst it is impossible to predict currency movements you can guarantee that behind the scenes there is plenty of activity and big positions being taken. I avidly remember when I spoke with someone in the financial markets the morning of Brexit vote +1. The person on the other end of the line told me that he had no idea how the markets were going to react but that fortunes had been made the morning of 24th June 2016 with currency speculators betting against GBP v EUR and USD.

These same speculators love uncertainty as it gives them more influence over the market…in theory. However, given the fact that recent key announcements don’t really seem to be devaluing Sterling any further it gives you the impression that it may have found a level of equilibrium that prices in any current uncertainty…for now.

FAST FORWARD TO MARCH 29TH – BREXIT DAY
I think it is safe to say that post Brexit day Sterling is likely to suffer marginally, purely due to the negative economic notions associated with it. The news flow during this period is, in the main, likely to be negative (unless you read the Daily Express or Daily Mail) and therefore it is reasonable to assume this will have an impact on Sterling and push it further down.

LONG DRAWN OUT NEGOTIATIONS
The negative news is probably already being prepared as I write and therefore we can expect a gush of it next week. However, stretching the time horizon out further into the process the news flow will probably slow to a trickle with occasional floods, dependent on political news on any given day. It is absolutely clear that an advanced economy which has been involved in an economic union for the last 56 years cannot extract itself from this same union in only 2 years and therefore the negotiations ‘could’ continue a lot longer than expected. A long drawn out negotiation with the EU could work in Sterling’s favour and we could see a significant rally.

INVESTMENT PSYCHOLOGY
I think it is also useful to never forget the psychology of people and our cumulative tendency to be over anxious in times of stress and over confident when times are good. This is a classic investment bias and no one is immune to it, not even the greatest minds. Our currency biases are no different. We can easily anchor to an exchange rate that we feel is a ‘natural level’ based on our own experience, but on what basis are we making these assumptions? Are we seeking out all opinion, even that which is contradictory to our own thinking or are we making these assumptions based on information that we seek out to confirm our own opinion?

Maybe Sterling is overly devalued merely on the preconceived notion that its choice to leave the EU is a bad thing. Unfortunately for us we are about to enter uncharted territory and our biases will soon be tested.

LONG TERM FUNDAMENTALS
In reality, it is good to look at the facts, even though understanding our own psychological processes around exchange rates is probably more important. But BEWARE:

What I am about to write may just allow you to ‘anchor’ your perceived idea of where Sterling should be valued based on what you already think. I would encourage you to not let my musings influence your thoughts!

Using long term macro-economic modelling, Sterling looks very undervalued versus the Euro. Without Brexit, you could easily argue that fair value should be around 1.4 euros to the pound, taking into account structural economics only. Assuming Brexit, we can work on the basis of c.1.25 but it could take years to get there.

Productivity is the key driver of this long term model – particularly productivity in the tradable goods sectors. This is likely to suffer after Brexit due to non-tariff barriers to trade (think about the additional overseas regulation and customs regimes that need to be implemented post Brexit). That said productivity growth in the EU is and has been weak and it is unlikely to surge ahead whilst the UK economy recalibrates, which should ultimately limit the damage to Sterling.

Over the medium term, the exchange rate trades within a range of values where 2 or 3 year interest rate expectations would imply it should be.

So the next time you speak with someone and you hear yourself quoting a post Brexit level of 1.25 or a long term rate of 1.4. Make sure you remember where you heard it first and pinch yourself. It’s all theory. The rate is what it is on any given day and there is nothing you can do to influence it!

Currency swings have a major impact on people’s lives. Therefore, it is important to make sure that the rest of your financial affairs: investments, pensions, tax planning etc., are working to maximum effect. If you would like to ensure that all your other financial affairs are in perfect working order then don’t hesitate to contact me on gareth.horsfall@spectrum-ifa.com or call me on +39 333 649 2356 for a FREE consultation.

Modelo 720 Reporting Time!

By Chris Burke
This article is published on: 23rd March 2017

23.03.17

Just a reminder that time is running out for submitting your Modelo 720 declaration.

All those tax residents in Spain, (those living in Spain for more than 183 days a year or where Spain is the main base for your business), should be aware that as a result of legislation passed on 29th October 2012 residents in Spain who have any assets outside of Spain with a value of €50.000 or more, are required to submit this declaration form to the Spanish authorities. (that’s €50.000 or alternative currency equivalent).

This declaration can be made online, through the Tax Office`s web page www.agenciatributaria.es where the Modelo 720 (Tax in Spain) can be located and completed. It must be filed between January 1, and March 31, of the first year of residence, to avoid being investigated or fined by the Spanish authorities. I would personally recommend speaking with your accountant / Gestoria to avoid mistakes.

The assets outside of Spain that are subject to this declaration form fall into 3 asset categories:
1. Property
2. Bank accounts (cash)
3. Investments

To warrant a declaration the total value of assets should exceed € 50.000 in each or any one of the categories; e.g. if you have 3 bank accounts and totalling up all the balances it exceeds the €50.000 limit you are subject to making the Modelo 720 declaration. However, if you have a bank account at €30.000 and say, investments valued at €30.000 then there would be no reporting requirement as they are in separate categories and each individual total value does not exceed the €50.000.

A declaration must be submitted individually, regardless of the percentage of ownership (in joint accounts). For example, if you have a joint bank account with a value exceeding €50.000, although your particular (say €25,000) share is below the threshold, each owner would still be required to submit an individual declaration based on the total value of the account.

Although this declaration of assets abroad is solely informative and no tax is charged, failure to file, late filing or false information could result in serious consequences.

For this reason, we recommend that everybody arranges to declare their assets, to avoid the imposition of fines from a minimum of €10,000 to a maximum of 150% of the value of those undeclared assets located outside Spain. Once you have made your first declaration it is not necessary to present any further declarations in subsequent years, unless any of your assets in any category increases by more than €20.000 above the initial value declared.

Changes to QROPS from 9th March 2017

By Chris Burke
This article is published on: 23rd March 2017

The UK Government announced major changes to Qrops schemes as from the above date (note this does not affect those who already have a Qrops). In essence, anyone who is resident outside of the EU/EEA or not living in the country where their Qrops is based (limited options here) will be taxed at 25% of the value of their pension, if this occurs within 5 years of starting a Qrops (i.e. becoming non UK resident).

So for example, Chris Burke moves his pension from the UK into a Qrops on the 30th March 2017 to a scheme based in Malta (one of the most popular places to hold your Qrops due to its strict regulation). In 2021 (4 years time) Chris decides he is moving to Dubai. He would be taxed 25% on the value of his Qrops.

Why is the UK doing this?

Well, there are many reasons and you would think Brexit is one (many people leaving the UK and perhaps taking their pensions with them). Qrops is also very popular due to its potentially tax efficient and security aspect of securing your UK pension (this is not the case for everybody so good advice is needed). You would also have to look at the potential taxes the Government would raise from this, there are many Qrops based schemes around the world and by limiting where you can hold your pension greatly affects those that can move it.
So to clarify, UK pension transfers to QROPS requested on or after the 9th March 2017 will be subject to a 25% tax charge, unless;
1. The QROPS is in the EEA and the Member is also resident in an EEA country.
2. The QROPS and Member are in the same country or territory. This is a limited if negligible part of the market.
3. The QROPS is an employer sponsored occupational scheme, overseas public service pension scheme or a pension scheme established by an international organisation.
Draft Guidance confirms that for the purposes of these measures, the EEA includes Gibraltar, which is considered part of the EU as a part of the UK.

Banks start plans for Brexit

By Chris Burke
This article is published on: 22nd March 2017

22.03.17

After U.K. Prime Minister Theresa May set a date to trigger the formal mechanism for quitting the EU, within weeks some of the worlds Big investment banks will begin the process of moving London-based operations into new hubs inside the European Union.

The biggest winners look likely to be Frankfurt and Dublin. Those people familiar with the plans, asking not to be named because the plans aren’t public, include the Bank of America, Standard Chartered Plc and Barclays Plc. To ensure continued access to the single market they are considering Ireland’s capital for their EU base. Meanwhile, Frankfurt is being eyed by Goldman Sachs Group Inc. and Citigroup Inc respectably others said.

Dublin shares similar laws and regulations as its U.K.neighbour and is the only other English-speaking hub in the EU. Whilst Frankfurt is a natural pick, given a financial ecosystem featuring Deutsche Bank AG, the European Central Bank and BaFin.

Executives want to have new or expanded offices up and running inside the EU before the U.K. departs in 2019. With banks increasingly expecting a so-called hard Brexit – the loss of their right to sell services freely around the EU from London.

It is thought London could lose 10,000 banking jobs and 20,000 roles in financial services as clients move 1.8 trillion euros ($1.9 trillion) of assets out of the U.K. after Brexit, according to think tank Bruegel. Other estimates range from as much as 232,000 jobs to as few as 4,000.

Avoid Bank Charges

By John Hayward
This article is published on: 20th March 2017

20.03.17

A number of banks have a variety of current accounts. It would appear that customers are not always advised by their bank what is the best account for them. For many expatriates, especially those buying and selling property, when money is paid into or from a bank account, the charges made by banks can be huge. It is quite common for charges to be made on both the money entering the account, after a sale of a property, and then again on the same money when a new property is purchased and money is transferred to another party. Some banks have accounts which do not attract fees. There will almost certainly be conditions such as a minimum deposit into the account each month. However, and for many retired expatriates, these conditions are not likely to be too difficult to satisfy. You may even be paid interest on balances or receive bonuses on direct debits. Make certain that the account you have is the best for you.

Paying too much tax on pension income

When submitting an annual tax return in Spain, there are (at least) two ways of calculating the tax due on UK sourced income. One way is to tell your accountant how many pounds you received and the accountant will convert this into euros using the exchange rate from the previous 31st December. For example, the exchange rate used for annual tax returns submitted in June 2017 will be based on the rate as at 31st December 2016. The problem is that, with fluctuating exchange rates, one could be paying tax on money that was never received. Let’s say that each month from January to November you received monthly income based on an exchange rate of 1.15 but then by 31st December it had increased to 1.20 euros to the pound. Your tax bill will be based on 1.20 even though you had only received 1.15 for 11 months. The alternative way of submitting the return is to ignore P60s etc. and simply submit evidence of exactly what euros you received through the year. If you are not certain, talk to your accountant.

Obtain proof of your current address

More and more often, financial institutions will be asking for evidence of where you live. In so many cases, all bills are put in the name of only one partner and in these days of online banking, people are no longer sent bank statements and not all companies accept printouts from the internet. Make certain you have a bill (not mobile phone) in your name or obtain an updated Padron certificate.

QROPS Pension Transfer

By Chris Webb
This article is published on: 20th March 2017

If you ever worked in the UK, no matter what your nationality, the chances are you were enrolled in a private pension scheme. The UK government continues to tweak legislative changes affecting the expat’s ability to move this pension offshore. On the surface, these changes appear to limit transfer options, but in reality they have strengthened the legal framework offering expats continuing advantages.

Background

When you leave the UK your private pension fund remains valid but is frozen, or deferred, until you reach retirement age. The pension income you then receive is taxable in the UK no matter where you are based in the world. Once you die the pension will continue in the form of a spouse’s pension if you are married; otherwise it will cease. When your spouse dies, all benefit payments come to an end.

If you take any part of your fund and then die before you fully retire, a lump sum can be paid to your spouse.
In April 2006 Her Majesty’s Revenue and Customs (HMRC) introduced pension ‘A’ day. This liberalised UK private pensions and allowed people leaving the UK to transfer them overseas, often to a new employer. In doing this the UK complied with European legislation which allows all citizens the freedom of movement of their capital. Thus ‘Qualified Recognized Overseas Pension Schemes’ (QROPS) were born.

Recent Chamges 2017

During the March UK budget there was a very unexpected announcement regarding pension transfers out of the UK. The headline was :

“HM Revenue & Customs (HMRC) has announced that Qualifying Recognised Overseas Pension Schemes (QROPS) transfers for individuals not in the European Economic Area (EAA) will be hit with a 25% tax charge”.

At first glance it sent shockwaves through all concerned with pension transfers, after a moment to digest the news it became much clearer that there were exceptions to the rule, detailed below:
1. The QROPS Trustee is in the EEA and the client/member is also resident in an EEA country (not necessarily the same EEA country);

2. The QROPS and the member is in the same country; or

3. The QROPS is an employer sponsored occupational pension scheme, overseas public service pension scheme or a pension scheme established by an International Organisation (for example, the United Nations, the EU, i.e. not just a multinational company), and the member is an employee of the entity to which the benefits are transferred to its pension scheme.

It is also important to understand that if a client was to move outside of the EEA within 5 years of the transfer then the tax rate would apply.

In most of the cases I deal with this new tax ruling will not affect the transfer. Since moving to Spain all but one of the transfers I have implemented are EU based.

Implementation

QROPS are not necessarily the right thing in every single case. In order to decide whether it would be advantageous to transfer your pension or leave it in the UK, with the intention of drawing the benefits in retirement, please contact me so that I can carry out a personalised evaluation. There may be compelling arguments, outside of the evaluation alone, which are often overlooked and may affect you in the future.

One of these is that a large number of UK schemes are currently in deficit to the point that they will be unable to pay future projected benefits. This would mean that even though it looks as though there are arguments to leave your UK pension in situ it may actually be wiser to transfer it.

In order for you to make the best decision you need to professional advice on what would be the best situation for you. This will entail seeking details of the current UK schemes, including transfer values, the types of benefits payable to you and options going forward when you get to a retirement date and when you die.

Advantages & Disadvantages of a Transfer Between a QROPS and a SIPP

Advantages

Lump Sum Benefits
QROPS – If you transfer your benefits under the QROPS provisions to a Malta provider, in accordance with the rules of this jurisdiction, you may be able to take a pension commencement lump sum of up to 30% (unless you have already taken this lump sum from the UK pension). Under the current HMR&C (Her Majesty’s Revenue and Customs) rules to qualify for the lump sum option you must be age 55 or over. Your remaining fund is then used to generate an income without having to purchase an annuity. The 30% pension commencement lump sum is only available once you have spent 5 full, consecutive tax years outside of the UK (in terms of tax residence), if you are within the first 5 years, we strongly advise you to limit the pension commencement lump sum to 25%. From 6 April 2017 this 5 year period has been extended to 10 years.

SIPP – The maximum Pension Commencement Lump sum from a SIPP would be 25%.

No Liability to UK Tax on Pension Income
QROPS – This will be paid gross and you declare the income in the country you are resident in as long as the QROPS jurisdiction has a Double Tax Treaty (DTT) with the country that you are resident in. Transferring under the QROPS provisions ensures that, if tax is due on pension income, it will only be taxable in the country of your residence.
SIPP – This should be able to be paid gross, although many clients find this to be a very awkward process to solve as the pension company does not always talk to the HMRC and therefore at least for the first year or two the pension is paid net of basic rate tax and sometimes even on an emergency tax basis. This can be reclaimed, but will involve more paperwork than that of a QROPS.

No Requirement to Purchase an Annuity
There is no longer a requirement to ever purchase an annuity with either your UK pension or in the event you make a transfer under the QROPS provisions. Therefore the rules below are the same for a QROPS and a SIPP.

With both a QROPS and a SIPP the maximum age you must start to draw an income is from age 75. The Pension commencement Lump Sum must be taken by this age or the option to take it after this age is lost.

The budget changes in the UK has meant that from April 2015 the restrictions imposed from drawing a pension income from a UK Pension Plan will be scrapped. This means that investors will be able to take the whole of their pension as a lump sum if they wish from age 55. The first 25% would be the standard Pension Commencement Lump Sum but the remaining amount would be subject to your marginal rate of income tax. The Malta QROPS have now followed these changes to allow full flexibility also.
This would not be possible with a Final Salary pension. It would need to be transferred to a SIPP or QROPS to utilise these options.

Secure Your UK Pension Pot
Some defined benefit schemes in the UK are in deficit. Since the deficit forms part of the balance sheet of the company, this can present a huge risk to your pension fund.
Transferring your UK benefits to a SIPP or QROPS provisions could enable you to have full control of these funds without worrying about the financial situation of your previous employer.

Ability to Leave Remaining Fund to Heirs
QROPS – All death benefits will be paid out from the Malta QROPS with 0% death tax no matter what age an individual is.
SIPP – The recent UK Budget has changed how death benefits will be paid to their heirs in the future. If death occurs before age 75 then any remaining balance in a pension fund can be paid tax free to any beneficiary. Otherwise if a member passes away after the age of 75 then there would be a tax charge, any lump sum benefit would be subject to the beneficiaries marginal rate of income tax.

A transfer under the QROPS provisions will allow the member to leave lump sums without deduction of tax to heirs no matter what age they pass away, so it is clear and simple. (this is not applicable to Defined Benefit schemes). The below table shows the situation more clearly.

Defined Benefit Plans

UK Pension – (generic pension benefits)
	Scenario	Death Benefits
SRA	Married couple 1^st to pass away	50% income to Spouse
	Married couple 2^nd to pass away	0% of total plan
	Single but with grown up children	0% of total plan
	Lump sum to future heirs	0% of total plan

QROPS- Malta
	Scenario	Death benefits
SRA	Married couple 1^st to pass away	100% of fund value to any beneficiary
	Married couple 2^nd to pass away	100% of fund value to any beneficiary
	Single but with grown up children	100% of fund value to any beneficiary
	Lump sum to future heirs	100% of fund value to any beneficiary

SRA – Selected Retirement Age

The tables are based on the usual death benefits being taken in retirement. Some plans may have slightly different death benefits which may be higher or lower than 50% income provided on death and guaranteed periods for the first 5 years. Please check the exact benefits within your scheme for a full exact comparison.

Currency
A standard UK pension will usually only be invested and pay benefits in Sterling, which means the member runs an exchange rate risk in respect of pension income, in addition to incurring charges in converting the pension payments to the currency of their country of residence.
A transfer under the QROPS provisions means that the pension payments can be made in the local currency, thus potentially eliminating exchange rate risk.

Lifetime Allowance Charge (LTA)

QROPS – There is no LTA charge within a QROPS so transferring larger plans to a QROPS may not be caught in this reduction in the future. Careful planning will be needed with your adviser if you are close to the limit in the UK. (a transfer to a QROPS is a crystallisation event, so will be tested against the LTA at that stage, any benefits above the LTA at time of transfer will be subject to a 25% tax liability.

SIPP – This is a restriction on the total permitted value of an individual’s total accrued fund value in UK registered pensions, currently £1m. Those who exceed this value face a potential tax liability of 55% on the excess funds on retirement at any time when there is a “benefit crystallisation event” that exceeds the LTA. A benefit crystallisation event is any event which results in benefits being paid to, or on behalf of, the member and so includes transfer values paid to another pension scheme, as well as retirement benefits.

Disadvantages

Charges
QROP & SIPP If you have a pension(s) with a combined transfer value of less than £50,000 then the charges may be prohibitive.

Loss of Protected Rights
QROPS & SIPP – A transfer may result in the loss of certain protected rights, including Guaranteed Annuity Rates, Guaranteed Minimum Pension, a protected enhanced lump sum, or rights accrued under a defined benefit scheme. (These are shown in the section “Analysis of Your Existing Pensions”).

Returning to the UK
If you return to the UK, then the QROPS administrator will have to report this ‘event to HMRC and the pension scheme will become subject to UK pension regulations again.
If it is your intention to return to the UK in the near future then a transfer under the QROPS provisions is usually inappropriate. If this was the case then we can help with our UK SIPP offering which may be more appropriate.

Taxation of UK rental income in Italy

By Gareth Horsfall
This article is published on: 19th March 2017

19.03.17

Since the recent exchange of information between HMRC and the Italian tax authorities on UK rental property owners, I have been asked the question whether rental income (when taxed principally in the UK) will be taxed again in Italy as an Italian resident.

Rental income from properties is dealt with according to the law of the state where the property is situated. This means that you can deduct your expenses in the UK, in entirety and in line with UK law, and then the NET income is declared to HMRC in the UK.

When it comes to the Italian tax declaration the NET UK rental income needs to be declared, along with the tax paid in the UK.

This income is put together with any other income you may have for the year, to be declared in Italy,and a credit is given for the tax already paid in the UK, and the tax is calculated on the normal IRPEF rates (income tax rates in Italy).

In short the NET UK rental income position is what needs to be declared in Italy.

Given the recent clampdown on people who are not declaring their UK rental income in Italy, as Italian residents, this information should help to ease any thoughts of having to pay tax twice.

Of course, all this applies to properties held in other countries as well and not just the UK.

The bottom line is get your affairs ‘in regola’ because it is unlikely to cost you any more than it would in the UK, and you can sleep easy knowing you have done the right thing.