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Wealth Matters

March 15, 2019

Fiduciary Wealth offers clients both in the UK and in the Iberian Peninsula a full range of independent financial services with a particular emphasis on tax led solutions to solve domestic and cross border planning needs. With offices in Central London, Spain and Portugal as well as a head office in Gibraltar, our holistic client focused approach to financial planning is coupled with a strong in house asset management capability.

Below you will find a number of topical articles which should be of interest. To benefit from any of our services, in the first instance, either email wealth@fiduciarywealth.com or call your most convenient office.

The importance of sound financial advice

Decisions about your financial future are among the most important you will ever make. Having a carefully managed financial plan in place will help you achieve your life goals and make you better prepared to deal with whatever the future holds. Whether you are looking to grow your wealth, take income from your retirement plans or make plans to pass your existing wealth on to future generations a good financial adviser can help you understand your options and recommend what is best for you.

Not everyone has the time or the confidence to navigate the complex world of finance and investments on their own. Unless you are really adept at dealing with technical issues then it usually makes sense to invest in sound financial advice.

Financial planning does however go way beyond simply choosing the right products. Your financial adviser should understand what is happening in the marketplace and the fine detail around changes to legislation. At Fiduciary Wealth we will take an holistic view of your finances and use our experience and knowledge to identify issues and opportunities that you might not have considered or even heard of.

A good adviser will always be able to demonstrate the benefit of that advice to you, whether it is minimising your IHT liability or putting in place an investment strategy that accurately reflects your attitude to risk.

Your adviser should also tell you whether their advice is entirely independent looking across the whole of the market or restricted either by only dealing in particular areas or offering a limited range of products. This can quite often the case when dealing with advisers working for larger institutions where the emphasis is on promoting a limited range of products and investments.

Your adviser ought to be able to research and select the right investment opportunities for you and then to actively monitor the performance of those investments rather than produce an off the shelf investment solution that is outsourced to a third party without accepting any responsibility for those decisions.

When it comes to pricing there is no such thing as free advice. We like to offer an initial consultation without charge simply to get to understand our clients’ situation and whether or not we are in a position to advise on a particular issue. However every adviser should be able to explain and confirm in writing the cost of their advice and how this will be paid together with the cost and fees associated with any product recommendation. This will soon be a requirement in the UK and probably in the rest Europe as well in the not too distant future.

If you want to find out what proper financial advice is like from a regulated firm that specialises in tax led cross border financial planning with an emphasis on proactively managing your investments then you should speak to one of our qualified advisers.

Should you be declaring in the Spanish Tax Amnesty?

Spain is the latest country to give residents an opportunity to come clean over their undeclared financial assets and put their tax affairs in order by paying a special 10% levy. Without being alarmist this is part of a wider package of measures aimed at combating tax fraud in Spain and as ever expatriates are a politically soft and therefore extremely vulnerable group when it comes to being at the forefront of any new anti-evasion measures.

No one should really think they can be resident in Spain and maintain undisclosed savings and bank accounts in other jurisdictions and yet avoid being drawn into the fiscal system. The financial nomad will soon become extinct if the measures currently being employed by the Spanish tax authorities are anything to go by. We have seen plenty of correspondence from Hacienda challenging non residency status claims on the strength of a regular pattern of electricity use or the disclosure of the existence of deposit interest through some stray correspondence. The government has warned that it will get tougher when the amnesty period is over. However paying the amnesty penalty and putting your affairs in order is just the beginning, those savings and investments will then be brought into the system and taxed at the full rate moving forward.

Of course Spain is not alone, all jurisdictions are keen to increase their tax revenues and there is more and more co operation and exchange of information between countries. With the EU Savings Directive in the process of being amended the strategy of hiding assets within a trust or company structure is likely to fall foul of new disclosure rules.

The silly thing is it does not have to be like this. There are perfectly legitimate ways as a Spanish resident to structure your savings, investments and retirement plans so that they generate growth and income in the most tax efficient manner possible. Now isn’t that a better option than facing sleepless nights wondering when the authorities are going to catch up to you.

Before you do anything you should talk to Fiduciary Wealth regulated advisers & cross border specialists with offices in Spain and London who will review your situation and provide you with a tax led strategy moving forward that will ensure that your financial affairs are put in order and stay that way moving forward.

If you are an expatriate considering your retirement planning options here are some key factors that you need to consider.

Be careful who you speak to. many so called advisers would not be qualified to offer advice in the UK and some are not regulated which means they are unlikely to carry professional indemnity insurance or be able to offer any redress if something goes wrong.

Do not invest in QrOPS until you have spoken to an adviser who can review your existing pension arrangements and properly explain any advantages that QrOPS might have over your existing scheme.

Do not be taken in by promises of extra lump sum payments or greater income benefits. HmrC has already changed QrOPS rules to outlaw schemes promoting 100% lump sums and will be quick to stamp on any future abuses of these their rules. remember your pension is there to provide you with an income for life, if you spend the money now what will you live on in the future?

There may be no such thing as a free lunch and there is certainly no such thing as “free” financial advice. You may be entitled to a free initial consultation but make sure your adviser explains all the costs and charges of any product they recommend and sets these out in writing. If the charges are reasonable then there should be no problem in getting you to agree to the terms.

Take time to understand the tax implications of your retirement plans as they affect you in your country of residence. retirement planning should dovetail with your overall financial planning objectives and your estate planning requirements. Don’t treat your pension in isolation. Ask your adviser to explain the implications of taking a lump sum from your pension fund or how taxation will affect any income that you draw.

Do not think you have to have a tax wrapper to invest in QrOPS. Sometimes a wrapper can be the most sensible and cost efficient way of arranging QrOPS and other times it can be an unnecessary and expensive additional layer of cost. The key point about any financial planning is that unless your assets are pro actively managed moving forward in line with your attitude to risk then you may well be disappointed.

If you are not happy with your pension adviser then you have a right to change. Get a second opinion; find out how a professional firm can look after your interests moving forward.

UK Inheritance Tax, Spanish Succession Tax or Both?

One of the biggest causes of concern for expatriates is their assets and wealth being subject to a massive tax liability on death.

When you take up residency in Spain you might think that you have seen the end of the British tax system. Certainly you will fall into the Spanish system as far as income tax and savings tax is concerned but UK Inheritance Tax is not so easy to shake off and can follow you wherever you live as it is based on the principle of domicile rather than residency.

Domicile is a legal term which means you belong to a certain country and is normally acquired at birth. If you want to become domiciled in the country in which you are living you would have to prove to the UK authorities that you have no material connections with the UK and that you are permanently resident elsewhere.

For IHT purposes you are deemed to be UK domiciled if you have been resident in the UK for 17 of the past 20 tax years. Even if you have been outside of the UK for the requisite number of years ownership of property or business interests in the UK might well lead to a judgement concluding that you retained your UK domicile. UK domicile means that you are liable to IHT on your worldwide assets. Well that’s ok you might think, the UK has a reasonable allowance against inheritance tax and there is no tax between spouses so effectively no tax to pay on first death so we will stick with the UK system and find a way to shelter assets against the 40% tax liability.

Enter Spanish Succession Tax which is completely different. It is payable if the beneficiary lives in Spain or if the asset being passed on is situated in Spain. Now the most significant difference between UK IHT and Spanish Succession Tax is that there is no exemption between husband and wife. What is more the top rate of tax can be as much as 82%.

In some autonomous regions of Spain the main home can pass between spouses with little or no tax provided certain conditions are met but where the beneficiary is not resident in Spain only the less generous state rules will apply. Anyone living in Spain but UK domiciled can end up with an inheritance tax liability in both countries albeit with the ability to offset some tax against the other.

Inheritance tax can have a devastating effect on inheritors and quite frankly some of the potential solutions put forward by some advisers are unlikely to hold water if challenged by the authorities after you die.

Why should your beneficiaries suffer the consequences of bad planning or worse still no planning at all? You should speak to Fiduciary Wealth, cross border specialists with offices in Spain and London who will tailor a solution to suit your specific requirements. Don’t let the taxman British or Spanish, deprive your beneficiaries of the inheritance you intended for them.