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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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Expats Retirement Planning – No-one can See into the Future

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There could be risk in waiting, of course, and it is considerable risk. By hesitating now you risk losing the opportunity to take advantage of all the EU expat retirement transfer benefits currently offered to those who choose Self-Invested Personal Pensions (SIPPs) or Qualifying Recognised Overseas Pensions (QROPS) right now.

This is not to say that these advantages will instantly disappear come spring 2019, but the reality is that Brexit is turning out to be drawn-out process with little current certainty and that it will take some time for any agreed changes to take effect.

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Expat Campaigners Close in on Frozen Pension Change

BubblePensions, whether private, workplace or state, are essential to the retirement planning of UK expats all over the world, whether they live as close to the UK as the Netherlands or Norway or as far away as Grand Cayman or the Grand Canyon.

However, around half a million British expats suffer a pensions shortfall of as much as £4,000 a year simply because they have chosen to live in a country or region without a reciprocal agreement with the UK and their pensions have been frozen.

Many of them feel it is unfair that they have no choice but to live on a lesser income or to take steps to redress the situation by consulting their expat financial advisers for inventive solutions. But, things may be about to change as MPs have created a parliamentary alliance to change the expat pensions law.

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