Residency question(s)

[duncan99210]

OK, my understanding is that you pay tax where you live. So if you're resident in Spain, you'll pay Spanish taxes. In addition, if you have income arising in the UK you'll be taxed on that by the HMRC. You then submit a tax return to the UK authorities to reclaim the tax that the Spanish authorities levied on you, which is how the "no double taxation" system works to my understanding. So it's of little relevance what the Spanish tax free allowance is.

If your pension is over the UK limits, it will be taxed at source under the PAYE system. If the residual income exceeds the Spanish allowances, they'll tax it as well and you then reclaim that tax from HMRC.

 

[ripvan1]

Nooooooooo - have you actually read what I have said. There is NO tax on our uk state pensions (it conveniently equals our personal allowance) so the double tax wotsit does not come into play ---- however Spain regards uk state pension as income and offsets it against spanish personal allowance which I believe is around the 11/12000 area - so in effect as the max uk state pension is below this we won't be taxed.

Sorry to be blunt but I've been hinting at this throughout my recent posts - perhaps didn't explain it very well. Thanks for the input tho' I'm sure any discussion about this will come up again and be useful to others.

 

[Sea Devil]

OK, my understanding is that you pay tax where you live. So if you're resident in Spain, you'll pay Spanish taxes. In addition, if you have income arising in the UK you'll be taxed on that by the HMRC. You then submit a tax return to the UK authorities to reclaim the tax that the Spanish authorities levied on you, which is how the "no double taxation" system works to my understanding. So it's of little relevance what the Spanish tax free allowance is.

If your pension is over the UK limits, it will be taxed at source under the PAYE system. If the residual income exceeds the Spanish allowances, they'll tax it as well and you then reclaim that tax from HMRC.

The above is not the way it works for me nor is it how I think it works.

If you generate money - income, pension in the UK then it is taxable in the UK... There is no legal way round that. Where the money is generated is the country in which you pay tax.

Not sure how legal it was but when I lived in France I paid UK tax on all the money I earned in the UK over and above my tax allowances. But I also had my publishing business which I operated from France so I paid French Income tax on that but actully claimed my French personal allowances so the tax was reduced. More than that I received income from various countries throughout the world by way of publishing and residuals - because that money was not generated in the UK I paid no tax on them and failed to mention them to the French as the money came into UK offshore banks.... I suspect the French would have demanded that I pay tax on these monies as they have different laws to the UK...

There are in Spain two different sorts of residency - one for Pensioners and the like, who are non tax paying residents (Any UK income will be taxed in the UK even if it is paid direct to a Spanish account) The other is for foreigners gainfully employed in Spain who pay into the Spanish tax system.

The advantage in paying tax in Spain appears to be that when you sell your own home in Spain you will not be subject to withholding tax but there may be other advantages.. but if you are not working in Spain and not generating money in Spain then you cannot pay tax... I think if serious money is involved you should consult a Spanish Accountant but beware there are lots of 'ex pat' type companies that will offer to do totally unnecessary tax returns for you in exchange for a fee.............

I am not an accountant but have been ex pat for 25-30 years in various countries as well as several years of no fixed abode in the boat - still paying UK income tax. The above is my opinion and should not be taken as gospel!

 

[macd]

If you generate money - income, pension in the UK then it is taxable in the UK... There is no legal way round that. Where the money is generated is the country in which you pay tax.

That may the way it often works, but it is by no means a universal truth. I generate money in the UK (both pensions and investments) which is not taxed there. It's all above board. I have a UK tax code: "NT" (No Tax).

It may well be that this is so because of detailed terms of the tax convention between the UK and Isle of Man, which may be different in conventions with other countries. I don't know. But what I do know is that many HMRC staff are ignorant of the true regulations and will argue black is white until shown chapter and verse.

 

[Sea Devil]

That may the way it often works, but it is by no means a universal truth. I generate money in the UK (both pensions and investments) which is not taxed there. It's all above board. I have a UK tax code: "NT" (No Tax).

It may well be that this is so because of detailed terms of the tax convention between the UK and Isle of Man, which may be different in conventions with other countries. I don't know. But what I do know is that many HMRC staff are ignorant of the true regulations and will argue black is white until shown chapter and verse.

You surprise me... but as I said I am not an accountant.. My suspicion is that you have slipped though the net.

There is a dedicated telephone tax service for ex pats - and normally they know everything about tax paid in the UK by expats. https://www.gov.uk/topic/personal-tax/living-working-abroad-offshore I have found them very helpful.

 

[macd]

You surprise me... but as I said I am not an accountant.. My suspicion is that you have slipped though the net.

Your suspicion is quite without foundation. The double-taxation treaty between IoM and UK is very clear on this, and has been since 2008. Indeed HMRC publish on the web a guide to their many treaties which confirms this (and also confirms that the arrangment is by no means unique to IoM). Trouble is, hardly anyone at HMRC has actually read it.

Fortunately the Manx tax authorities, who deal with the issue on a daily basis (which an individual officer in HMRC clearly would be unlikely to), do know the score. It's clearly in the interest of their employer that they should.

P.S. I wonder if your "surprise" is at least in part due to the fact that it has been stated repeatedly and emphatically on these forums that UK income is taxed in the UK...period. I sometimes used to point out that this is not necessarily the case but usually just let it ride. Nobody seemed to take any notice and life's too short.

Anyway, here's HMRC's guide to their double taxation treaty arrangements with everyone: https://www.gov.uk/government/uploa...356800/Digest_of_Double_Taxation_Treaties.pdf

It would seem from this that full relief for pensions, both government and 'other', and for interest payments, is commonplace. It does not sustain the notion that UK income is always taxed in the UK; nor, come to that, does the guide sustain Sybarite's claim that "You are [exclusively] taxed where you are resident".

 

[macd]

My suspicion is that you have slipped though the net.

Since that amounts to a suggestion that I have, however inadvertantly, been defrauding HMRC, you might at least concede that you are mistaken. The fact is that for over a year HMRC was happiy defrauding me, and has more recently been up to the same nonsense with my partner...through ignorance rather than intent, perhaps, but the effect on our pockets is just the same.

P.S. Please don't get the idea that I thought your remarks intentionally offensive.

 

[ripvan1]

Following several comments on barclays offshore I looked online about this and it seems they are not accepting new customers - Can't make out whether Natwest International has minimum of 25 or 50k opening deposit. Also thinking of putting a good wedge in Spanish bank while exchange is good so recommendation for Spanish banks would be welcome.

 

[JamesFrance]

I have been resident in France for about 10 years and agree with macd. The only income I have which is taxed in the UK is from dividends which are paid with a tax credit which is deductible from French income tax and social charges (although I am awaiting repayment of the social charges for the past 3 years as they were charged illegally by France for UK pensioners and the EU has found against them).

UK bank interest is paid without deduction of tax and so are pensions except for public service pensions such as military, nhs etc which are taxed before payment.

 

[Sea Devil]

Since that amounts to a suggestion that I have, however inadvertantly, been defrauding HMRC, you might at least concede that you are mistaken. The fact is that for over a year HMRC was happiy defrauding me, and has more recently been up to the same nonsense with my partner...through ignorance rather than intent, perhaps, but the effect on our pockets is just the same.

P.S. Please don't get the idea that I thought your remarks intentionally offensive.

Hello,

Please accept my apologies as I certainly did not intend any disrespect or suggest that you had any intention of doing anything wrong.

I have been a freelance person since I was 25, working a lot overseas and sailing with no fixed abode, so there has always been my excellent accountant looking after my tax affairs.

I am not going to make anymore posts on this thread as whilst, I think you are wrong, it frankly does not matter to me as my tax affairs have always been taken care off by a professional and I was foolish to try to pretend to be an expert and try to pass on my experience. I should have just shut up - so I will.

Fair winds

Michael

 

[macd]

Please accept my apologies as I certainly did not intend any disrespect or suggest that you had any intention of doing anything wrong.

I am not going to make anymore posts on this thread as whilst, I think you are wrong...

Michael: I didn't think for a moment that you meant any disrespect. Equally, I've often valued your counsel (I bought one of your books, after all).

As for your still thinking I'm wrong, I still take no offence, but both the Manx tax authorities and HMRC demonstrably beg to differ (which, rather than personal vanity, is why I do, too). Have you read the link I posted above? It makes it very clear: clear enough to persuade even HMRC staff who hadn't previously read it to change their minds.

By way of confirmation, here's the content of an e-mail received a few years ago from IoM tax:

Dear Mr McD*****

Being a Manx resident your UK pensions should be exempt from UK income tax. It would therefore not be included on any HMRC assessment. This would mean that your UK bank interest should be offset against your personal allowances.

Kind regards

Jonathan Davidson
Executive Officer
Income Tax Division
Treasury
Government Offices
Douglas

The double taxation guide to which I posted a link makes it clear that the same applies to many other countries as well as the Isle of Man. However, double taxation treaties vary considerably one to the other, so any statement claiming any sort of universal truth is just plain damn wrong. The only inevitability is death. And maybe barnacles

 

[macd]

I have been resident in France for about 10 years and agree with macd. The only income I have which is taxed in the UK is from dividends which are paid with a tax credit which is deductible from French income tax and social charges (although I am awaiting repayment of the social charges for the past 3 years as they were charged illegally by France for UK pensioners and the EU has found against them).

UK bank interest is paid without deduction of tax and so are pensions except for public service pensions such as military, nhs etc which are taxed before payment.

Thanks, James. Good to know that not everyone has swallowed the cliches.
As to your last para, the public service pensions to which you refer are known within UK double taxation treaties as 'government pensions'. They are often, but not always, treated differently from other forms of pension. So far as the IoM is concerned, anyone merely 'resident' would pay UK tax on a UK government pension; but anyone 'normally resident' would not. I know this not simply from the HMRC digest, but from the details of a recent case with which I'm familiar.

 

[ripvan1]

Any recommendations or negative comments on Spanish banks for potential resident welcome - thanks

 

[Sea Devil]

We used to bank with Barclays Spain but when we moved to Ronda it was no longer convenient.

Caixa Bank was round the corner and has ended up purchasing Barclays Spain so it seemed sensible to move to them.. Best thing we ever did in Banking terms. Brilliant intuitive website in both Spanish and English. Very easy to operate and inexpensive by Spanish standards. I really recommend them. Santander did not want to know us which was interesting.

 

[ripvan1]

Thanks Michael, that confirms what a few people have said to me - both about Caixa and Santander.