Selling as a resident and tax return

[Jayjay]

Hi all,
I'm getting conflicting advice from two solicitors so I'm hoping someone on here can steer me in the right direction.
We have residency and sold our house at a loss last July, (the notary warned the buyer he would get a bill as we sold it too cheap). We spent less than 183 days in Spain last year.
One solicitor says we do not need to fill in a tax return for 2015 , however another says we do and that we must declare our new home in the UK and will have to pay tax on that as well as it's an asset. We will not be returning to Spain due to ill health and would like some honest advice so that we can fly over and do the necessary in one trip.
Thanks in advance for any guidance,
Jayjay

[Miro]

Were you fiscal residents? Did you obtain a certificate of fiscal residency prior to the sale, in order to avoid the 3% non-residents retention? If so, I can see that you may be required to file a tax return even though you didn't spend more than 183 days here. I'm not sure why you would have to pay tax on your new house though? I suppose you might have been required to declare it as a foreign asset using 720 (deadline now passed anyway).
Will be interested to see what others suggest. Sorry I can't give any advice as such. I suspect that if you were to ask a third solicitor, you'd get a third answer

[Jayjay]

Thanks for your reply.
Yes I'm sure I would get a different answer from a third solicitor! We have only just bought the UK property, two weeks ago so I don't know why I would have to declare that for 2015. We were fiscal residents so I assume that's why we have to do a return but it's so confusing when those that should know give me different advice.

[Beachcomber]

If you were fiscal residents of Spain in 2015 and you had purchased your UK property in 2015 you would have needed to pay imputed income tax pro rata to the number of days you owned it in 2015. As you only bought it this year you would not be liable to pay this tax until the 2017 tax return. However, you should do a tax return for 2015 even if it is a negative one so that it ties up with your return to UK fiscal residency from 2016 onwards.

It is important that you establish that your fiscal residency is now in the UK to prevent any complications in the future.

Sid may be able to help you further.

[Miro]

If you had made a capital gain on the sale in Spain, I could see why you'd need to declare the purchase in the UK, to offset any potential CGT, but since you said you sold at a loss, I can't see why the UK property would figure on your 2015 declaration either. Certainly can't see any need to declare it as an asset, nor pay any tax on it. But it may be advisable to de-register as a fiscal resident here so that they don't come after you for 2016.
I can see, however, that you'd need to file a tax return for 2015, since you didn't sell until July, which would suggest that although you perhaps weren't physically in Spain more than 183 days, your primary place of residence was still Spain. Otherwise, you would have had 3% retention deducted from the sale proceeds.
I'm kinda thinking out loud here, on what is undeniably a complicated issue, and hoping that someone better informed than me can give some more thoughts on it.

Just seen BC's post after mine. Surely imputed income is only payable on second homes? Since clearly the OP sold their primary residence before purchasing another, this wouldn't apply anyway, would it?

[Beachcomber]

Yes agreed, I was just trying to work out why one of the lawyers thought he should pay tax on the UK property. I had written my reply before I saw Jayjay's second post stating that he had only just purchased his UK property and I amended my post it before I posted it to take account of this.

[CapnBilly]

I think the problem is that if you were fiscal residents then you would normally have to submit details of the sale and claim reinvestment relief in respect of the U.K. Property in the return covering 2015, even though you made a loss.

However, you state that you were non-resident for 2015, and presumably the notary did not retain the usual 3% because you were able to prove fiscal residence. If you were non- resident then you would normally submit details of the sale on a Modelo 210, and since the changes in the relief in 2015, this is where you also claim reinvestment relief. Normally you have to submit details of the sale within 4 months of completion of the sale.

The problem I see is that you must submit details of the sale in some way, and as you are late with regard to Modelo 210, this is presumably why the other solicitor is suggesting the annual return, but this may bring other problems in terms of any income you may have in 2015.

[Miro]

...you state that you were non-resident for 2015, and presumably the notary did not retain the usual 3% because you were able to prove fiscal residence.

Yes, that's certainly confusing! I think the important thing here is that the OP was fiscally resident, despite claiming that he was not actually in Spain more than 183 days.

If you were non- resident then you would normally submit details of the sale on a Modelo 210, and since the changes in the relief in 2015, this is where you also claim reinvestment relief.

Bit confused by this. If you were non-resident, there wouldn't be any reinvestment relief, would there? I thought that only applied to primary residences? What changes are you referring to, by the way? I haven't read anything about changes to reinvestment relief; could you elaborate please?

[CapnBilly]

If he was fiscally resident in 2015 (but I'm not clear he was) then he must submit a tax return, report the sale and claim relief, end of.

The ability to claim reinvestment relief when you sell your residence In Spain and buy a new residence in another EU state was formalised with effect from 1st January 2015. It was always thought that this was the case, but it is now specified in tax legislation.

[Miro]

Well, that's a (pardon the pun) relief, because I was counting on that when we finally sell up and buy in the UK. Now I only have to worry about whether the UK will actually be another EU state or not by then!

[Jayjay]

Thank you everyone for your answers, it's such a minefield!
I think we will do the annual tax return as usual, give out p60's to show income and tax paid in the UK for 2015 and hopefully find a way to de-register ourselves. Seems you guys on here know more, need to find a better solicitor I think!

[MartinEB]

Our solicitor has advised us to become non-residents before we sell (if we sell)!

[Jayjay]

Not sure that would have made things any easier to be honest.
If I de-register for tax purposes after I have done my tax return using modelo 030 does anyone happen to know if I can do this electronically or if I need to present it in person?
Again, thank you for replies

[CapnBilly]

You can submit a modelo 030 electronically, but you need a digital ID or Cl@vepin. They will probably ask you for a Certificate of Fiscal Residence from HMRC. If you have a digital ID you can upload this online.

[Jayjay]

Thank you, nothing is straight forward is it?

[Miro]

Our solicitor has advised us to become non-residents before we sell (if we sell)!

I'm curious to know why specifically?
I assume you must already have a home elsewhere (UK?) to declare as your primary residence? Otherwise, not too sure how exactly you would do this anyway, assuming also that you intend to continue living here until you do sell - especially if you sell in the second half of the year, meaning you already would have exceeded 183 days. Also, if you make yourselves non-resident, you'll be subject to the 3% retention, regardless of whether you've made a gain or not. And if you haven't, you'll have to fight to get it back long after your gone.

[Miro]

You can submit a modelo 030 electronically, but you need a digital ID or Cl@vepin. They will probably ask you for a Certificate of Fiscal Residence from HMRC. If you have a digital ID you can upload this online.

If HMRC are anything like Hacienda, they won't issue a certificate of fiscal residence until you submit a tax return, so that could complicate things further. Also, if they're anything like Hacienda, they could decide not to issue a certificate of fiscal residence unless you can first prove you're not a tax resident in Spain!

[Jayjay]

The mind boggles. What happens if I don't de-register?

[CapnBilly]

Fortunately HMRC are not like Hacienda, and will issue a certificate before you submit a return, if you have income which is subject to PAYE, and you tell them you have returned. You can complete an online return and provide them with an explanation, and why you need a certificate.

[Jayjay]

Thank you all for your help. We filed the return today and Hacienda are paying us e1.54!!
All done via a gestor rather than a solicitor with no hassle... No paperwork, proof etc required and all documents signed off.