Of all the financial issues that concern expats, taxes due on death are a major worry, particularly when the objective of accumulating assets over a lifetime to pass on to future generations can be so dramatically affected by death duty taxes. The situation is compounded by the fact that whilst residence is fairly clear cut, spend 183 or more days in Spain and you are deemed resident here and HMRC will readily accept that you are no longer liable for income tax unless earnings are generated back in the UK; your liability to death duties is not so transparent.
When it comes to death we have the thorny question of “domicile” to unravel. Domicile can be difficult to shed particularly should you retain assets or interests in the UK or have only recently exited the country. Add to this the fact that as Spanish resident succession tax is payable by your beneficiaries before they can benefit from your assets in Spain and that there is no double taxation treaty between the two countries in respect of this element of tax, your assets could end up being subject to tax in both jurisdictions. There are more complications, there are different rules for residents and non residents and different allowances in the various autonomous regions of Spain. So do you know what taxes your estate might be faced with on death and how these will be paid? If you have assets in the UK over £650,000 (for a married couple) do you really want a tax of 40% to be applied to the excess? Do you realise that in Spain there is minimal spousal exemption from tax and that on death of your partner could be liable for tax on 50% of your jointly owned assets?
The good news is there are plenty of things you can do in conjunction with your adviser to mitigate this liability but you need to take action now rather than leave things to the last minute. The best solution for you will depend on the type of assets you hold, where they are situated and whether you want to retain control. For example, you may be surprised to know that as a Spanish tax resident you can effectively use a recognised retirement planning strategy to generate income at very low rates of tax whilst at the same time remove the assets within the scheme from any liability to UK inheritance tax. For UK assets there is the opportunity to make use of potentially exempt transfers which allow you to give away assets and providing you no longer benefit from them and you live for a further seven years these will be removed from your estate. Worried about your mortality? You can always insure your life with a “gift inter vivos policy” which will cover the outstanding tax liability throughout the seven year period.
There are a plethora of different options that can be considered. Clearly you need to speak to an adviser who understands these cross border issues and can put together a comprehensive strategy to ensure that your assets are protected as far as possible and that tax due will be minimised. Isn’t it worth speaking to someone now? For an appointment to discuss your requirements in detail contact +34 956796911 or email firstname.lastname@example.org.
“Sell in May and Go Away?”
Are you concerned about stock market volatility and the fact that markets continue to be plagued by uncertainty over the future of the Euro following the recent elections in France and the turmoil in Greece after inconclusive elections there? Or perhaps the future of the Spanish economy and its fragile banking sector is causing you sleepless nights? Do you feel you have missed the boat by not investing earlier in the year and taking advantage of the growth in the US, German and Asia Pacific Markets in 2012? Have you been recommended to invest in obscure and more risky schemes promoting a variety of carbon emission or energy schemes, viaticals, or hotel rooms/accommodation in the search for supposedly better or even “guaranteed” returns? Or are you ready to take some profit and adopt a more conservative approach over the coming months?
If you are considering investing or currently hold a portfolio you should be speaking to us. Before we do anything we will discuss your requirements in detail, determining your objectives and analysing your attitude to risk. Only when we are confident that we totally understand your needs will be begin to put forward an investment proposal. What we will do is give you measured advice and follow that with an ongoing commitment to monitor the progress of your investments to ensure that the strategy we have in place continually meets your objectives.
For an initial discussion please telephone + 350 200 50982 or email email@example.com.
The Retail Distribution Review in UK
The UK Financial Services Authority has carried out a far reaching review of the UK market place and a number of significant amendments have been put in place that will radically change the way consumers do business with independent financial advisers. Indeed many commentators have suggested that the amendments that will come into effect on January 1st 2013 are likely to dramatically reduce the number of independent advisory firms operating making proper financial advice even harder to come by.
With a branch office located in the heart of london close to Oxford Street we have followed the progress of the Retail Distribution Review very carefully to ensure that our business model will be fully compatable with the new requirements and our people trained to the highest standards.
So what are the changes? From 1st January 2013 independent advisers must offer either truly independent advice or a restricted version. Those who offer independent advice must be able to select from all of the products in the marketplace and furthermore to have a thorough understanding of all products hence the requirement to demonstrate through enhanced qualifications a higher degree of competency.
Finally commission will no longer be option for financial advisers. Paying indirectly through commission means an amount will be deducted by the product provider from the products you contract to buy. Commissions vary between different products leading in some cases to a bias towards particular products that pay a higher commission rate. From 2013 independent advisers will not be able to take a commission but instead will have to quote a fee for the advice given. In many instances this fee will still be able to be paid from investments but rather than the cost of purchasing an investment be shrouded in mystery there will be complete transparency as far as costs are concerned both from product providers and advisers.
We see the implementation of RDR as an extremely positive step in an industry that has been dogged by misselling scandals and lack of professionally qualified advisers offering products where the pricing is totally transparent. There is a strong likelihood in due course that a revised markets directive MIFID II will produce a similar revision of the financial services industry in Europe although this may be a few years away.
We have already adopted our business model to work within the RDR framework and believe that our proposition sits very well with the new proposals laid down by the UK regulators. If you are concerned that your current advisers will not meet the standards laid down by RDR or you would like to discuss your requirements moving forward please do not hesitate to contact us by telephoning +442079980570 or emailing firstname.lastname@example.org.
Cross Border Financial Planning Issues UK & Spain
Have you really thought about the wider financial implications moving to Spain entails? This goes well beyond the need to establish formal residency and to begin paying your taxes locally if you are spending more than 183 days in any year in your new country of residence.
If you have savings and investments that were set up in the UK to take advantage of the tax rules there you need advice on how these will be affected by your new residential status. For example you may have invested in tax free savings plans in the UK (ISA’s) but need to be aware that not only can you no longer add to these investments but also that any income generated will be taxed in Spain. Similarly you may have invested in a UK offshore bond and been eligible to draw 5% of the original investment tax free each year. now that you are Spanish resident this benefit no longer applies and this type of investment can be heavily taxed here. However there are alternative options available that might be suitable and can defer taxation until a withdrawal is actually made.
Nor can you hide behind the fact that you hold money in an offshore bank account. As a Spanish resident you are subject to tax on your worldwide income including any bank interest even if you never withdraw it. Under the terms of the EU Savings Directive most jurisdictions including Jersey and Isle of Man are now exchanging information with your local tax office and for the few that do not the rate of withholding tax that will be retained has increased to a staggering 35%.
As well as a seeking out a comprehensive review of your savings and investments you need to consider what to do with your retirement planning benefits. Many people are aware of QROPS and the fact that you can transfer your UK scheme into this type of arrangement but what are the real benefits? HMRC has recently redrafted QROPS legislation to stop unscrupulous advisers flouting the rules by offering clients a way of releasing 100% of their pension fund as a lump sum and tightening up on some of the reporting restrictions. In many cases a bona fide QROPS scheme will allow a UK expatriate living in Spain to draw pension income at a tax rate of under 3% whereas the same income being drawn in the UK might be taxed at 20%, 40% or even 50%.
Perhaps the biggest area of uncertainty and concern for those exiting the UK is inheritance tax and the impact a move to Spain will have. Of course Spain has its own succession tax rules but unlike the UK this is levied on beneficiaries and the value of assets they receive rather than the estate of the deceased. It is important to understand that just exiting the UK doesn’t mean you no longer have a liability to inheritance tax. In the worst case scenario your assets could be subject to taxes in both countries and your beneficiaries might ultimately end up a lot poorer than they imagined.
Moving to Spain, or any other country for that matter, means making a complete review of your financial arrangements to ensure that these are structured for maximum tax efficiency taking into account your personal circumstances and individual requirements. This is particularly important now following the significant rise in the rate of which savings are taxed in Spain and the re introduction of Spanish Wealth Tax. For an appointment to discuss your requirements in the first instance telephone +34 956796911 or email email@example.com.