Wednesday, 30 March 2011

Why Invest Offshore?

Offshore financial planning is much more open than used to be the case but still has many advantages. This is especially true with the use of Trusts.

·         Not for tax evasion!

·         Lost faith in British & Irish Banks or Insurance Companies

·         Strategic financial planning

The term “offshore” originally comes from financial institutions located offshore from UK in the Channel Islands and Isle of Man, but is now used figuratively to refer to banks in many regions, particularly Bermuda, the Cayman Islands, Bahamas and politically neutral European jurisdictions such as Switzerland. In recent times, New Zealand has a growing reputation for flexible trusts and liberal investment rules.

Individuals or organisations (including companies and businesses) may be interested in placing assets offshore for a variety of legitimate reasons, including:

1.      The existence of a sophisticated infrastructure of financial institutions and     professional service providers (lawyers, accountants, corporate services, etc). This is particularly true of Jersey and Guernsey where most of the financial services professionals will have trained in the UK

2.      Tighter government regulation in the region in which the financial institution is domiciled. This may allow for a relatively favourable investment environment as compared to onshore.

3.      Access to politically and economically stable jurisdictions. This may be an advantage for individuals who lack faith in the financial institutions in their ‘home’ country. After experiences of the last few years many British and Irish people might have lost faith in Banks.

4.      Tax neutral.  Having no added local tax burden is a useful advantage for individuals who are not obligated to pay tax on worldwide income, or who may be able to defer taxation.  It also allows individuals to structure their assets without having to worry about local tax complications.

5.      As part of estate and/or asset protection planning.

6.      Broader "global" view than often found with onshore institutions.

7.      Strong privacy and confidentiality laws to help protect depositor's privacy.

8.      Trustees in the UK are often large companies, sometimes owned by insurance companies and seen to be impersonal. It is more likely that the services of a Trust Company in Jersey or Guernsey will be much more personal, though possibly also more expensive, but the expertise level is very high.

Before considering any offshore investments you should carefully consider you objectives and decide what you are trying to achieve. The expertise in giving you advice needs to be at a high level. I can recommend advisers with the expertise, if you email me.

Tax Evasion Warning
Individuals with non-legitimate intentions may also seek to do business offshore, just as they do onshore, incorrectly assuming that their activities may be more likely to be overlooked or found acceptable. This of course is tax evasion and is illegal. The only advice I can offer such individuals is to make themselves legal and legitimate! Use an authorised and regulated adviser that I will be happy to recommend id you email me

You can write to me with your personal experiences or to be put in touch with my recommended adviser by sending me an email

Wednesday, 23 March 2011

UK Budget 2011

From a Spanish perspective

There are many expats, especially pensioners and expat workers who have a close vested interest in the UK Budget. There will be much more analysis over the coming days but I thought an outline summary would help. It is not likely to be a very detailed, as George Osborne’s first Budget was only in June with an Autumn Statement last November.

If you would like a professional analysis from UK economists please email me and I’ll give you the link.

  • Personal Allowances for income tax are increasing in line with the Lib Dem manifesto and the Coalition agreement in 2011/12 the allowance will be £7,475 and in 2012/13 will rise to £ 8,105. This is the amount anyone (UK taxpayer) can earn before paying any tax.

  • Corporation Tax on company profits to be cut by 2% to 26% and will be down to 23% over the next three years. This highlights what the Chancellor calls .Britain open for business’. Though unlikely to affect Spanish residents directly, it could encourage UK companies to expand….into Spain?

  • UK to adopt a single-tier rate of Retirement Pension of £140 per week, to replace all of the confusing ‘add-ons’. No date has yet been fixed for this proposal. On this one, the devil will be very much in the detail!

  • The proposed Air Passenger Duty increase from April has been delayed, until 2012 which is temporary relief for the travel industry. Those of us who travel regularly will welcome that one.

  • The fuel duty ‘escalator’ has been scrapped along with the planned increase of 4p per litre. Instead the level of duty is reduced by 1p per litre, with immediate effect. If you ever do much driving in the UK then that will be welcome, but the ‘pump’ price is likely to be about 15% higher than in Spain.

  • The Chancellor also announced a ‘fair fuel stabiliser’ to reduce fuel duty when the cost of fuel rises with the opposite happening if fuel costs ever fall! The details will be available later.

There are many other facets to the Budget but I wanted to publish the key details quickly. If any other factors come to light, later, I will produce an update. It could be worth putting this in your favourites and checking.

If you have any specific queries, please email me.

Wednesday, 16 March 2011

QROPS - Questions and Answers

Updated with readers questions

·        Is there a minimum amount for QROPS?
·        Explaining New Zealand QROPS and Foreign Trust
·        You can move your UK pension assets to QROPS
·        Who can advise me?

 Qualifying Recognised Overseas Pension Schemes (QROPS) were introduced in April 2006, by the UK Government, as part of a process called Pensions Simplification.

In this ‘Question and Answer’ format should be the main issues for those of you who live in Spain or indeed those who intend to live in Spain. Individual queries can be sent by email

What’s the minimum amount I can transfer into a QROPS?
Some advisers regard sums of under £100,000 as ‘small pots’ not worth transferring. However, with extremely low annuity rates and poor rates under the GAD rules, readers, with less than £100,000 to be transferred, need and deserve advice. New Zealand QROPS, which I have dealt with, are certainly worth readers looking at. Let me recommend an adviser, click here. If your adviser says your fund is too small – seek a new adviser!

Is the New Zealand Foreign Trust (NZFT) a QROPS
Strictly speaking, NZFT is not a QROPS but it is an investment option for the cash from a New Zealand QROPS. The NZFT has very favourable Trust arrangements, a very liberal view of what can be invested, including property, together with no rules on levels of income. As it is a specialist facility, please let me introduce you to an appropriate adviser by emailing me. You need to be UK non-resident for five full and complete tax years to qualify.

Is the transfer into a QROPS expensive?
The main cost associated with a QROPS is the preliminary registered scheme
transfer work that is required before your pension assets can pass into a QROPS. This is specialist work and I’ve never thought cheapest is best in professional advice. However, it must be reasonable. A really good financial adviser, who is properly authorised and regulated, will put the costs in writing, before expecting you to sign up to their scheme. I’m happy to recommend such an adviser if you contact me here. Please be aware that some advisers  don’t tell you the costs in an open and unambiguous way. Always seek clarification.

As part of my ‘second opinion’ option, if you have a report which is unclear, send it to me and I will give my thoughts.

I’m happy with the investment in my SIPP, why can’t I transfer it to QROPS?
If an adviser indicates that you cannot transfer your existing pension investment to QROPS they are wrong. This type of transfer is known as an ‘In-Specie transfer’. It is acceptable in QROPS because to meet the rules in the UK the investment has to be approved. If the investment is acceptable in  UK pension funds then it is perfectly satisfactory in QROPS.

Some advisers have difficulty in distinguishing between their own business model and the rules! To avoid such advisers, please email me

What can I invest my QROPS assets in?
There is a flexible choice open to you and part of a good adviser’s process is to determine and agree an investment strategy which closely matches your needs. Your attitude to investment risk is also key, since it will indicate the asset classes that you should use and those to avoid.

Will any benefits I take from QROPS be taxed?
QROPS income is generally not taxed at source. The tax treatment of what you receive is very favourably treated in Spain, though you need individual advice to explain how it affects you.

What will happen to my QROPS when I die?
Any funds remaining when you die will either be paid to those nominated by you as beneficiaries or those same beneficiaries may simply continue deriving the same tax free advantages you were enjoying in your lifetime.

Are there any circumstances in which I shouldn’t transfer to a QROPS?
If you want the certainty of income and are prepared to hand over your fund to a pension provider, then an annuity might suit you better than QROPS. I would not suggest you to transfer to QROPS if you intend to be expatriate for less than six years, but you need advice from an authorised and regulated adviser.

I’ve heard about unscrupulous QROPS providers and intermediaries, any
In May 2008, Her Majesty’s Revenue and Customs (HMRC) withdrew status from all Singapore based QROPS. This action emphasises the importance of taking independent advice from industry experts who are in regular contact with HMRC to ensure that any transfers do not nor are likely to fall foul of HMRC regulations. The best advisers can also offer a choice of QROPS based in more than one jurisdiction. Ask to be introduced

Which is the best QROPS jurisdiction?
The only honest answer is that it depends on personal circumstances and can also be determined by an individuals own preferences. I can say that for Spanish residents the worst jurisdiction would be Spain!

If the pension value is quite modest and you have been UK non-resident for more than five full and complete tax years, then New Zealand is a credible jurisdiction. Under these circumstances you have the option to encash your pension plan.

By being open and frank with an authorised and regulated adviser, a plan can emerge which has to be in the individuals best interests. If you email me, please give me a brief outline of your circumstances and what your immediate objectives might be. I will ensure that you get authorised and regulated advice. If you live in Spain and are considering a Pension Transfer (including QROPS), the adviser that I recommend will regulated by one or more of the following;

Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products.

Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain.

The Financial Services Authority – the UK’s financial services regulator.

* * * * * * *

If you have a further question, I’d be delighted to answer it. Those of you who live in Spain or intend to live in Spain should be very careful when choosing an adviser. You can write to me with your personal experiences or to be put in touch with a recommended adviser Email me here

For most people, a pension fund is their second biggest asset. Do not get involved with unauthorised and unscrupulous ‘advisers’.

From my own experience, I only ever recommend advisers that I know and even then I am happy to help my readers by ‘looking over their shoulder’. Whatever you decide to do please tread carefully.

Monday, 14 March 2011

Spanish Inheritance Tax (ISD)

This complex issue is often ‘swept under the carpet’ but eventually everyone is affected. In particular, the prospect of a widow(er) paying inheritance tax on the death of their spouse can come as an enormous shock.

·         There are State rules and variations by the Autonomous Communities (AC)
·         State rules always apply to non-residents
·         Autonomous Region rules will apply ONLY to Spanish residents
·         There is no Double Taxation Agreement on inheritance Tax between Spain and the UK

Impuesto sobre Sucesiones y Donaciones (ISD) is also called Succession Tax or Inheritance Tax and is a tax on inheritance and gifts, paid by the recipient of the inheritance or gift. It is due only if the recipient is resident in Spain or the asset being inherited or gifted is an asset located in Spain such as real estate or moveable property situated in Spain. If the property is owned by a UK company ISD is not payable on the death of a shareholder of the company.

Allowances are available depending on the relationship with the deceased or donor. In the first instance the Spanish State rules apply but these can be varied by the different Autonomous Communities (ACs) providing conditions set by the relevant AC are met. The State rules always apply to non-residents owning assets in Spain.

There is currently no blanket exemption between a husband and wife under the State rules. Where a married couple are both residents in Spain and one spouse dies, the surviving spouse can be fully liable on the worldwide assets inherited from the deceased spouse, subject to the allowances and reliefs available.

The worldwide estate of British expatriates who are UK domiciles on death will also be liable to UK inheritance tax, as well as to Spanish succession tax on chargeable Spanish assets. Any succession tax paid in Spain can be deducted from any UK inheritance tax liability on the same asset. There is such a fundamental difference between the inheritance tax in the two countries that no double taxation agreement exists on this issue. Please email if you need referral to a professional advisor.
State Rules
Beneficiaries are divided into the following four groups depending on the closeness of relationship to the donor or the deceased:
  • Group 1: Natural and adopted children and other descendants (such as grandchildren, great-grandchildren) under 21
  • Group 2: Natural and adopted children and other descendants aged 21 and over; parents and other ascendants (such as grandparents, great-grandparents), and spouses
  • Group 3: In-laws and their ascendants/descendants, step-children, brothers and sisters, cousins, nieces and nephews, aunts and uncles
  • Group 4: All others including friends or unmarried partners
State Allowances
There are tax-free State allowances on inheritances (not life-time gifts) for members of the different groups as follows:
  • Groups 1 and 2: €15,957
  • Group 3: €7, 993
  • Group 4: nil
Group 1 inheritors under the age of 21 can have an additional deduction of €3,990 for each year they are under 21, restricted in total to €47,858 per recipient.
There are further reductions where the recipient is physically or mentally disabled depending on the recognised degree of disability.

Relief for main home

There is a 95% allowance against the inherited value of the main home of the deceased up to €122,606 per inheritor, provided that the beneficiary belongs to Group 1 or 2 or is a remoter relative over the age of 65 who lived with the deceased during the two years prior to their death. The property must be retained by the beneficiary for 10 years following the death, but it does not need to be the beneficiary's main home.
Succession tax rates vary from 7.65% to 34%. The tax liability is subject to multipliers based on the pre-existing wealth of the recipient, which can take the highest effective rate of tax to just below 82%.

Autonomous Communities (AC)

The Autonomous Communities (ACs) can vary the State rules in the taxpayer's favour. The State allowances and reductions apply in the first instance provided that the relevant conditions have been fulfilled. Any enhancement to the State allowances and reductions granted by the AC will then replace the State deductions, again providing any additional conditions imposed by the AC are fulfilled.

Please note, however, In the case of real estate in Spain owned by a non-Spanish resident, the State rules will always apply on the death of the non-resident owner.

In some ACs, spouses and children can receive a 99% reduction in the inheritance tax payable on death. This reduction currently applies in the Canary Islands, Balearics, Murcia Region, Madrid, and Valencia Community.

In AndalucĂ­a, spouses and children are exempt from inheritance tax where the taxable value of the inheritance received is no more than €175,000, and the wealth of the recipient does not exceed €402,678.

In Cataluña, personal allowances increase significantly from 1 July 2011.

In many ACs, unmarried couples registered as a pareja de hecho are recognised as spouses.
It is important to look closely at the rules relating to a specific AC’s to obtain full details of the range of allowances and exemptions available. I can put you in contact with professional advisors in most regions, if you email

Succession tax is paid under the AC's rules if the deceased was habitually resident there, in the case of an inheritance; or, in the case of a gift of real estate, if the real estate is located in that AC; or, in the case of a gift of any other assets, in the AC where the recipient is habitually resident.

To be habitually resident in a particular AC, you must have been resident there for five continuous tax years. So, the deceased or donee (as the case may be) must have been continuously resident in an AC for the past five years for that particular AC's rules to apply, otherwise the State rules will apply.

These complex rules and arrangements indicate that careful planning is required. You can get an indication of how this affects you by entering the appropriate information on this link;


Seeking the information does not constitute any commitment on your part.

You can feel free to email me on any of these issues.

This complex issue has been researched using information available on web pages, consulting contacts and the writers own knowledge. It cannot constitute advice and professional guidance maybe required.

Wednesday, 9 March 2011

QROPS Factsheet

QROPS Factsheet free of charge is for readers of Financial Pages in Spain and is produced by the Publisher and Editor, David Goodall. It will be sent to you by return email and you have a ‘cast iron’ guarantee that your address will not be given to third parties. You will only be sent the QROPS Factsheet, any later updates and other completely relevant information. Request your free copy of QROPS Factsheet by sending an email .

Qualifying Recognised Overseas Pension Schemes (QROPS) have been around for less than five years. From my internet research, adviser reports sent to me and misinformation I have heard, there are many myths around. Very important issues are raised. There is also the opportunity to ask your own personal questions.

Following a request from a regular reader, I have decided to produce a QROPS Factsheet. It is not generally available but readers of my blog and website have the opportunity to ask for a copy.
      • Residency explained
      • The five year rule
      • The importance of jurisdiction
      • The Regulators
Further information is available at

Your copy of QROPS Factsheet is only available by email, based on the terms set out above and totally free of charge