Tax resident in UK and Spain

[alisonb]

If you are tax resident in both countries, presumably UK will have first bite, since they will deduct tax at source from income generated in UK. Do you then still declare all income to Hacienda, offsetting tax already paid? Do you get tax allowance in both countries? Has anyone worked out whether, if you do get the two allowances, you are any better off, considering that Spain is much more highly taxed than UK?

[El Cid]

If you are tax resident in both countries, presumably UK will have first bite, since they will deduct tax at source from income generated in UK. Do you then still declare all income to Hacienda, offsetting tax already paid? Do you get tax allowance in both countries? Has anyone worked out whether, if you do get the two allowances, you are any better off, considering that Spain is much more highly taxed than UK?

If you are tax resident in both countries because of the UK's strange 90 day rule then the double taxation treaty kicks in and you would be deemed to be tax resident in Spain as you spent most of your time there.

That means that you declare all of your world wide income in Spain and either deduct any tax paid in the UK or, if the income is a pension (not a government pension) then you can apply to have it paid gross which makes life simpler.

Any income that is generated in the UK (including government pensions) will be liable for tax in the UK irrespective of whether you are resident or not. In this case UK allowances apply.

The only people who are better off under this arrangement are government pensioners as they get allowances in the UK but do not have to include that income in their Spanish declaration.

Sid

[alisonb]

That means that you declare all of your world wide income in Spain and either deduct any tax paid in the UK or, if the income is a pension (not a government pension) then you can apply to have it paid gross which makes life simpler.

So you can apply for a non government pension to be paid gross, even if you are tax resident in UK?

[El Cid]

That means that you declare all of your world wide income in Spain and either deduct any tax paid in the UK or, if the income is a pension (not a government pension) then you can apply to have it paid gross which makes life simpler.

So you can apply for a non government pension to be paid gross, even if you are tax resident in UK?

Not unless you have agreed with HMRC that you are actually tax resident in Spain under the terms of the taxation treaty and that you have declared your pension to them and are paying tax on it.

As a tax inspector once said to me - "We won't let you off our hook until you can prove you are on someone else's hook!"

Sid

[alisonb]

Yes, we've been declaring it in Spain for a few years now. Does this mean that there is no need to tell the UK taxman if you spend 90 days there - since that seems to be asking for trouble in view of the mistakes that HMRC are making with people I know in Spain.

[El Cid]

Yes, we've been declaring it in Spain for a few years now. Does this mean that there is no need to tell the UK taxman if you spend 90 days there - since that seems to be asking for trouble in view of the mistakes that HMRC are making with people I know in Spain.

So are you currently paying the tax in the UK and deducting it from your Spanish tax?

If so you should really fill in the FD9 form and get it paid free of tax in the UK. If the HMRC are happy that you are tax resident in Spain they should allow this and the 90 day rule normally becomes irrelevant.

Sid

[alisonb]

We're receiving it gross, but I was worried about the 90 day rule. Due to circumstances, we're spending longer in UK than we would like, which means my husband, at least, will probably exceed 90 days. But seems like there's no problem.

[El Cid]

The whole residency question is up for review to establish a clearer set of rules.

I wouldn't worry about it as if you are paying the tax in Spain there won't be a problem even in the very unlikely event that HMRC found out that you had spent more than 90 days in the UK and anyway the 90 days are calculated as an average figure over a period of 4 years.

It's a very complicated subject and if you want to make your brain really hurt you can read all about it at

http://www.hmrc.gov.uk/cnr/hmrc6.pdf

Sid

[blueeyes]

Hi, this is probally one for El Cid.I have now arranged to have my UK saving interest paid gross as I am resident here.In relation to paying tax on it in Spain ,will I need to exceed my personal tax free allowance before I start paying tax on the interest.
Thanks

[El Cid]

Hi, this is probally one for El Cid.I have now arranged to have my UK saving interest paid gross as I am resident here.In relation to paying tax on it in Spain ,will I need to exceed my personal tax free allowance before I start paying tax on the interest.
Thanks

That is true but you should still complete a tax declaration in Spain every year.

Sid