UK and Spain income tax situation after Brexit

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fyfin
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UK and Spain income tax situation after Brexit

Postby fyfin » Thu Apr 01, 2021 4:50 pm

I know that UK and Spain have a bilateral tax agreement not connected to EU so Brexit should make no difference but talking to some friends this morning over coffee (lots of different opinions lol), the consensus of opinion was that HMRC would not be liaising with the Hacienda after 1st June 2021.
Apparently this was posted somewhere!
I simply don't believe it and I know from experience that HMRC supplied my P60 figures to Hacienda who obviously requested them going back 4 years (long story I've posted before). I have no reason to think this co-operation or exchange of information will cease but I thought I would put it out here to see other opinions or indeed information.

One of the topics was Premium Bonds and I suppose this could be a grey area as, for example, you have less than €50,000 worth (certainly in my case) then you don't declare on a 720 form. You should declare prizes of course but how would the Spanish tax authorities know, was the question. They certainly aren't au fait with this type of investment (tax free in UK) and I believe it is treated as investment income here. I should add I have always declared any small amounts.

I discovered in conversation that some have been registered as residents for some years but still pay tax in UK and have never done a tax return and use a UK address despite living here full time. I did warn them that the Spanish tax authorities could catch up with them but the answer was , well, they can only go back 4 years and so far they haven't. Maybe we were stupid for doing everything right as we though and still falling foul of the system (all to do with bad advice re annuities)
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Re: UK and Spain income tax situation after Brexit

Postby Free at Last » Thu Apr 01, 2021 5:12 pm

fyfin wrote: Thu Apr 01, 2021 4:50 pm I know that UK and Spain have a bilateral tax agreement not connected to EU so Brexit should make no difference but talking to some friends this morning over coffee (lots of different opinions lol), the consensus of opinion was that HMRC would not be liaising with the Hacienda after 1st June 2021.
Apparently this was posted somewhere!
I simply don't believe it and I know from experience that HMRC supplied my P60 figures to Hacienda who obviously requested them going back 4 years (long story I've posted before). I have no reason to think this co-operation or exchange of information will cease but I thought I would put it out here to see other opinions or indeed information.
The automatic exchange of financial information between countries was an OECD initiative, nothing to do with EU membership (or the Spain/UK Double Taxation Treaty), and far more countries signed up to it than the 26 EU member states. Therefore I cannot see that Brexit would have any effect at all on HMRC continuing to supply information to the Agencia Tributaria.

https://www.oecd.org/tax/exchange-of-ta ... change.htm

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Re: UK and Spain income tax situation after Brexit

Postby olive » Thu Apr 01, 2021 5:53 pm

Oh they are pretty good at finding stuff. They found 2.40 euros worth of undeclared interest on dormant UK building society accounts I had forgotten about - 2016 tax year. Not easy to close dormant accounts. I have observed that Hacienda are good at churning out demand letters but poor at responding to letters. It is pretty amazing that they have access to your UK accounts.

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Re: UK and Spain income tax situation after Brexit

Postby elusive » Thu Apr 01, 2021 6:04 pm

Totally agree with free at last. Its probably wishful thinking on some peoples part.

Hacienda dont have direct assess. Lloyds for example sends your account details to HMRC then at the end of the year HMRC send some or all of the info they have in their possession to the taxes offices of the country you told Lloyds you were tax resident in.

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Re: UK and Spain income tax situation after Brexit

Postby Paddy Pumpkin » Fri Apr 02, 2021 9:47 am

Echoing what the other commenters have said. Brexit and Non exchange of informtaion is wishful thinking
If it was that simple we would just go and park money in for example Singapore.


https://en.wikipedia.org/wiki/Common_Reporting_Standard

There are only 154 countries in the world who have signed up to exchange tax information. Strangely the US had not signed up the last time I checked but they have a separate system and foreign banks have to report back to the US if they have US customers otherwise the foreign bank will be unable to transact in US dollars (it's a little more complicated than that but that is the rough idea).



I tell clients it is very simple, the only financial systems you can hide money in now are places that you can never get your money back from. Either because they are not to be trusted and your money can disappear and you have no comeback or because if you do try to bring the money back to the 'civilised' world the alarm bells will ring so loud that it will be virtually impossible and you will ultimately have to prove where the money came from.

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Re: UK and Spain income tax situation after Brexit

Postby ashtondav » Fri Apr 02, 2021 10:29 am

Bitcoin.

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Re: UK and Spain income tax situation after Brexit

Postby El Cid » Fri Apr 02, 2021 11:50 am

Bitcoin holdings now have to be declared on Form 720.

Sid

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Re: UK and Spain income tax situation after Brexit

Postby Paddy Pumpkin » Fri Apr 02, 2021 12:19 pm

Even if you don't put it on Modelo 720 you will encounter problems spending it

How you can spend Bitcoin is limited so when you tansfer it back into currency that you can spend more easily it will show up. So you may be able to accumulate it but spending it will be very difficult. A bit like a drug dealer with cash

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Re: UK and Spain income tax situation after Brexit

Postby El Cid » Fri Apr 02, 2021 12:25 pm

Buy a Tesla?

Sid

katy
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Re: UK and Spain income tax situation after Brexit

Postby katy » Fri Apr 02, 2021 12:32 pm

ashtondav wrote: Fri Apr 02, 2021 10:29 amBitcoin.
As Paddy says "the only financial systems you can hide money in now are places that you can never get your money back from."

I would include Bitcoin too.

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Re: UK and Spain income tax situation after Brexit

Postby Paddy Pumpkin » Fri Apr 02, 2021 12:44 pm

El Cid wrote: Fri Apr 02, 2021 12:25 pm Buy a Tesla?

Sid
Cars have to go on a wealth tax declaration...so Hacienda will ask where the money came from to buy the car.
If your wealth is below 700k then maybe you could get away with it.

Although I am pretty sure Tesla in Spain will have to have money laundering checks in place. I know car dealers in UK, Germany and Ireland do.

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Re: UK and Spain income tax situation after Brexit

Postby katy » Fri Apr 02, 2021 1:08 pm

There are other loopholes now. Many get busted but some carry on. Remember all those Celebs and footballers who had to repay from a tax dodge gone wrong. A broker who lives in our village makes at least two or three trips to Jersey every year (perhaps he likes the beaches).

Anyone watched Ozark on Netflix?

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Re: UK and Spain income tax situation after Brexit

Postby Paddy Pumpkin » Fri Apr 02, 2021 2:26 pm

Do you mean this one?

https://www.accountingweb.co.uk/tax/hmr ... me-crushed

I was offered it. As part of the scheme you borrow money to finance the scheme. I asked the tax adviser will you lend me the money on a non recourse basis. So if anything went wrong and I get a tax bill then I didn't have to pay back the loan. He wouldn't. I asked 'why, surely it's 100% safe so you can't lose?'. He said that they couldn't be absolutely sure . That was all I needed to know...if he didn't believe it was safe from the tax man then neither did I.

Ozark yes watched it through. I can't recall the exact details but when I was watching it there were some obvious gaps in the story (financially speaking). I guess me watching that is a bit like a doctor watching casualty.

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Re: UK and Spain income tax situation after Brexit

Postby El Cid » Fri Apr 02, 2021 2:37 pm

I interesting though the discusión is, we are in danger of going off topic.

Back to bit about HMRC sending information to Hacienda, I think this is not necessarily at their request. HMRC know who is living in Spain and it’s easier to send all the data. Hacienda just run it through their computer and it identifies any differences.

It happened to me recently as the size of my annuity P60 was greater than the figure on my tax declaration as it, of course, was the heavily discounted amount. Easily sorted out after a lot of online messages.

If you have “forgotten “ to declare something they will want the money plus interest and 50% more as a fine.

Sid

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Re: UK and Spain income tax situation after Brexit

Postby fyfin » Fri Apr 02, 2021 7:53 pm

Yes indeed Sid, that is what I was talking about. Thet knew exactly what my P60 figures were and quoted them to me. I also had to prove one of them was discounted as purchased with my own money (no employer involved). It was resolved eventually after some communication.
I see no reason why this will not continue although some of my friends think it will all stop in June 2021.
It's amazing how many people I know who still pay their tax in UK, despite being registered Spanish residents and living here full time.
A few have been to Gestors and told not to worry and that they don't need to do tax returns in Spain. Various reasons given but mainly because their income is lower than some figure, in one case €12,000 and in another €22,000 - two different Gestors.
I'm just waiting till the Spanish tax office catch on, if they ever do! lol
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Re: UK and Spain income tax situation after Brexit

Postby Wicksey » Sat Apr 03, 2021 9:56 am

The figures declared to the UK will differ to those here as the tax years are different. I give copies of our P60s to our gestoria and whilst the annuity never differs and is the same despite the difference in reporting periods, our civil service pensions may differ slightly as we do receive pay rises in the year. The same with interest, although the amounts are now miniscule, and our rental income will also differ between the two country's returns. I complete my own accounts and give her the final figures to put on the return.

I'm not sure how my OH could prove he bought his annuity with his own money as he stopped paying into it in 2000. Who's expected to have records going back over 20 years?

I still have to do a UK return (even though we never earn enough to pay tax there) as I am a foreign landlord. Once we give that up and only have pension income I am hoping I can give up the UK return. I have read that if you only have one source of income and it's below the Spanish limit for tax, then you may not have to do a return here either?

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Re: UK and Spain income tax situation after Brexit

Postby peteroldracer » Sat Apr 03, 2021 10:30 am

Not making a declaration, even if it is a nil return, will catch up with them if/when they come to sell as pensioners. If they are in the system they will not pay any tax on the sale if it is their sole residence.
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Re: UK and Spain income tax situation after Brexit

Postby Wicksey » Sat Apr 03, 2021 10:34 am

We do nil returns now but I do see that it may be worth keeping them up in the future.

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Re: UK and Spain income tax situation after Brexit

Postby El Cid » Sat Apr 03, 2021 10:50 am

I would always recommend doing nil returns. It is so easy to do online now so you don't need to pay for it.

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Re: UK and Spain income tax situation after Brexit

Postby Wicksey » Sat Apr 03, 2021 10:53 am

I find the rental bit more difficult Sid so I'd rather pay for now. I think once we've given that up which we plan to do once we get state pensions, then it may be more straightforward .... once the CGT bit has been done :(


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