2011 – Another Taxing Year For British Expatriates In Spain

20.12.11

Please note that this article is over six months old. While Blevins Franks takes care to make sure that information is accurate on the date of publication, some content may change over time. You should not rely on the accuracy of legislation and tax information in this article; take professional advice for your circumstances.

I wrote articles at the end of 2009 and 2010 commenting what taxing years they were as governments have been intent on reducing their huge budget deficits, and the trend has continued

I wrote articles at the end of 2009 and 2010 commenting what taxing years they were as governments have been intent on reducing their huge budget deficits, and the trend has continued this year. 2011 was the year when austerity measures became the ?new normal? ? and it looks like they could be around for longer than expected. The wealthy are bearing much of the tax burden.

January

Spanish taxpayers start the year with a two additional income tax bands, so that the top rate of income tax is now 45%. In Andalucia and Catalu? it is 47% and 49% respectively.

It is reported that the Spanish authorities? efforts to crack down on tax evasion and fiscal fraud yielded a record ?10 billion the previous year. It is the result of years of strategic planning and improved technology and information sharing, so it should be easier for Spain to trace tax evaders in future.

In the UK, Dave Hartnett, the UK?s permanent secretary for tax, warns: ?Everyday HMRC exposes more money hidden offshore. So burying your head in the sand is becoming a very expensive and risky option?.

Stolen bank client data is back in the news with an ex Julius Baer employee handing over two CDs of stolen client information to WikiLeaks who say they may publish the data and hand it over to the UK Serious Fraud Squad.

February

Electricity companies in Spain are now obliged to provide information to the tax authority on the electricity consumption of every property in Spain. The taxman can use this information to detect electricity usage in a property and determine if a property declared as empty is being rented out, or if someone claiming to be non-resident is living here full time.

HM Revenue & Customs (HMRC) in the UK announce new penalties for offshore non-compliance. HMRC will invest ?900m over four years to tackle criminal behaviour, evasion and fraud.

March

The UK Budget announces that taxes and tax allowances will be increased in line with the Consumer Price Index (CPI) rather than the more generous Retail Price Index (RPI). The move is effectively a stealth tax.

April

New UK pension legislation comes into effect in the UK. On death after starting drawdown there is now a tax designed to recover past tax relief. This is at a fixed rate of 55%, which is a significant tax increase for those under 75 as their previous rate was 35%.

June

It is reported that HMRC has identified 500,000 British taxpayers who are suspected of failing to declare their offshore bank accounts.

July

The withholding tax rate applied under the EU Savings Tax Directive jumps from 20% to 35%. The Isle of Man and Guernsey abolish banking secrecy for accounts owned by EU residents and start applying automatic exchange of information on all their accounts and interest earnings.

August

The UK and Swiss governments initial a landmark tax deal. From 2013 Swiss banks will deduct a retrospective tax of up to 34% from all undeclared accounts and will start to deduct a withholding tax of up to 48% on future earnings. HMRC can submit up to 500 information exchange requests from the Swiss authorities each year. The Treasury says the agreement ?will resolve the long-standing abuse of Swiss banking secrecy?.

September

The Spanish government announces that wealth tax will be reinstated to ?reinforce budget stability?. ?The economic crisis makes it necessary to reinstate this tax, that will allow us to tax the wealthiest so those who have more contribute more to help us out of the crisis.?

October

HMRC starts writing to 6,000 Swiss bank account holders to warn them that it has information on their bank accounts and give them one last opportunity to fully disclose their accounts.

The UK tax authority also turns it attention to British taxpayers who own property abroad, warning them that: ?Wealthy tax cheats with overseas property are now being targeted by a new 200-strong team of investigators and specialists?.

November

In the UK, the courts once again rule in favour of HMRC and against international businessman Robert Gaines-Cooper in the long-running tax residency case. The ruling could have implications for other British expatriates.

December

Expatriates are disappointed when the Treasury announces that the statutory residence test will be delayed until April 2013. UK tax residence issues will continue to be determined by current ambiguous guidance for another year.

It is suggested that the Spanish tax authority has written to around 300,000 Spanish property owners so far, warning them that it is aware they have not submitted tax returns for 2007, 2008 and 2009. Recipients are advised to regularise their tax affairs before the authorities proceed with an enquiry which could entail penalty charges.

As governments continue to strive to improve their finances, we may see further tax increases as we move through 2012 and the clampdown on tax evasion is likely to intensify. For peace of mind and to find out how you can legitimately lower the amount of tax you have to pay consult a professional tax and wealth management adviser like Blevins Franks.

By Bill Blevins, Managing Director, Blevins Franks

15th December 2011

The tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; an individual must take personalised advice.

Tax rates, scope and reliefs may change. Any statements concerning taxation are based upon our understanding of current taxation laws and practices which are subject to change. Tax information has been summarised; individuals should seek personalised advice.

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