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Eight out of ten cats prefer mitigation

Similarly, Gary Barlow was named as an investor in a scheme named Icebreaker, which had been set up with the aim of generating paper losses that investors could use to offset against their profits elsewhere for tax purposes. Following a lengthy and expensive legal battle with the Revenue, the investors in Icebreaker were made to pay back millions.

These are both examples of tax avoidance. Whereas such structures are technically legal, they are nonetheless frowned upon by the tax authorities. Tax evasion, on the other hand, is entirely illegal. It is where an individual or company deliberately breaks the rules and deceives HMRC in terms of what they owe in tax.  Tax mitigation, however, is the legal way to minimise your tax liability using current legislation, exemptions and allowances, without the likelihood of being challenged by the tax authorities.

Examples of tax evasion include failing to file a tax return, not declaring your full income or hiding taxable assets. If HMRC disagrees with how you’ve calculated your tax liability it can seek to recover the shortfall with interest and penalties, including prison.

In response to a new wave of tax avoidance and evasion techniques, in 2013 the EU established the Common Reporting Standard. This provides for the automatic exchange of financial account information between Governments within the EU. It means that detailed taxpayer information is now automatically and periodically sent between Governments, providing complete transparency on the income and assets of those living abroad.

This represents a dramatic change from the former system, whereby financial information about an individual or business was only exchanged between tax authorities upon request, in cases where tax fraud was suspected.

As a resident in Spain, you will know that you need to submit your annual Modelo 720 by 31 March. This must detail your overseas assets and income in any of the following categories exceeding 50,000 Euros on 31st December.

1. Accounts in any kind of financial institution outside Spain e.g. banks, building societies.

2. Investments, including share holdings, ISAs, mutual funds, unit trusts, private or DB pensions, Premium Bonds, Trusts if you are the beneficiary.

3. Property and rights to property outside Spain.

After the initial return is presented, a new return must be filed when the total of any category of assets/income increases by 20,000 Euros or more, either at 31st December or during the last quarter of the year, or an asset is sold completely.

It is important to understand that under the new Common Reporting Standard, declared assets and income is now automatically compared between the source and the country of residence, so it is vital that you make sure you are clear on what is required of you when completing your Modelo 720.

Whether Modelo 720 is an attempt to raise government revenue in tax penalties or a misguided effort to target tax evaders, it is unfortunately here and we have to deal with it.  One way to mitigate the effects of the 720 is via the use of a Spanish Compliant Bond via a life company such as The Prudential, SEB or Old Mutual. Cash and investments can be held in these and they are exempt from the 720 declaration.

Contact me today if you’d like to find out more.

This communication is for informational purposes only and is not intended to constitute, and should not be construed as, investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, we are not responsible for any errors or omissions.

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Dealing with scams

Blacktower Financial Management

You may have seen emails alerting you to a new fraud specific to the financial services advice industry. We are not aware of any of our clients having been targeted in the way described below, but it is our responsibility at Blacktower to do everything we can to educate our clients about these scams to avoid any harm coming to them.

The fraudsters claim to be from the Financial Conduct Authority or local law enforcement and are targeting clients of investment management firms. They are advising clients that the investment manager, adviser or firm is under investigation. The fraudster specifically asks the client not to speak to their investment manager, adviser or firm, or even close connections, claiming this would be considered tipping off. The client is then advised to encash their portfolio and move the cash to the client’s bank account. Once this is done, the fraudster then ‘recommends’ an investment which is actually a scam.

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Expats in France enjoy improved quality of life

France has long been a favourite destination for expats. But what is it that’s so alluring about the country? Two recent expat surveys have highlighted a number of reasons behind why some expats chose to move to France, looking at all the main perks that are most commonly experienced. One key positive mentioned is the overall improved quality of life, with almost half of the respondents mentioning it as their main motivation behind moving.

In the HSBC Expat Explorer report that, released earlier in 2016, France placed ninth out of 45 countries for the overall experience, and an impressive fourth place for quality of life – fairing far better than the UK.

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