Tax avoidance and Tax evasion 2019 Update

Written in June 2019, sometimes interesting to look back!

These subjects have been made relevant from Spanish and UK Budgets in the past decade where  part of the Governments’ increased revenue will come from tackling Tax Avoidance and Tax Evasion. One of the problems I have with the subject is that in speeches politicians often confuse tax avoidance with tax evasion. This matters because Tax Evasion is already illegal. Closing down Tax Avoidance is in the hands of Parliamentarians to change. One way to do this would be to accept Anti Tax Avoidance Directive EU 2016/1164 which has five legally-binding anti-abuse measures and all Member States should apply against common forms of aggressive tax planning. 

Leaving the EU has definitely favoured the UK's billionaires and fellow travellers!

The five anti-abuse measures are;

Controlled foreign company (CFC) rule:  to deter profit shifting to a low/no tax country.
Switchover rule: to prevent double non-taxation of certain income
Exit taxation: to prevent companies from avoiding tax when re-locating assets.
Interest limitation: to discourage artificial debt arrangements designed to minimise taxes.
General anti-abuse rule: to counteract aggressive tax planning when other rules don’t apply.

IMPORTANT;

• Avoidance and evasion are not the same
• Downright favouring the wealthy is a political decision
• Tax avoidance in many cases is legal BUT over aggressive tax 'planning' CAN affect both the EU internal market and tax liabilities e.g. Profit 'shifting' 
• Tax evasion is illegal but needs effective and efficient COLLECTION systems

       

Tax Evasion – Definition

Unlawful attempt to minimise tax liability through fraudulent techniques to circumvent or frustrate tax laws, such as deliberate under-statement of taxable income or wilful non-payment of due taxes.

Whereas tax evasion is an offense (punishable by both civil and criminal penalties), tax avoidance is not.

Whatever politicians or the newspapers say there are no extra legal powers needed to stop Tax Evasion – it is illegal. Though HMRC in the UK and La Hacienda in Spain have to do MORE to stop it and COLLECT the tax.

If you need advice or have a query please email me

Examples of Tax Evasion

• Being resident in Spain but not declaring income to the tax authorities the extent of which is now coming to light
• Not declaring income from property letting
• Spanish resident having an Individual Savings Account in the UK and tax free interest
• Not declaring gross paid interest on offshore accounts
• Wilful refusal to pay tax

Tax Avoidance – Definition

Lawful minimisation of tax liability through sound and currently legal financial planning. Parliament could stop this

I am quite happy to answer any queries you may have but I will refer you to an adviser for authorised and regulated advice, if you email me

Examples of Tax Avoidance

• Pension schemes are legitimate and avoid tax but contributions and benefits have to be within HMRC rules and importantly, limits.
• UK residents having an Individual Savings Account
• QROPS for UK non-residents or intending non-residents
• The legitimate use of offshore trusts to hold assets but not if covered by EU 2016/1164
• The establishment of Trusts or Foundations for charitable purpose

Most Tax Avoidance in the EU is legitimate, subject to EU 2016/1164!  

• In the UK there was an ‘industry’ which looks for ways of creating Tax Avoidance. It is up to the Government and especially HMRC to make sure that the tax rules and laws are not circumvented. It is also possible in the UK to negotiate a deal with the Government or HMRC. This, of course, favours the super wealthy!

* * * * * * *

You can write to me with your personal experiences, ask me a question or to be put in touch with one of my recommended adviser by sending me an email

Linked with this post are two recent articles from my Blog;

Qualified, Regulated and Independent Financial Advice
http://expatsfrombritain.blogspot.com/2019/05/financial-advisers-must-be-qualified.html

Interesting, even in 2021?

Tell me your experiences, write to me by email

David Goodall

Financial Pages in Spain

Email: davidgoodall.spain@gmail.com

Spain – The Sun still Shines and Lifestyle is Healthy

Spain is great  for holidays, working, living & retirement

The beaches are clean, the Mediterranean is still blue, the food is fresh, lots of cheap flights, great deals on hotels and apartments but forget all that the headlines are bad! UK Press always give SPAIN a hard time

Personal Experience 

We bought our first house in Spain on 7^th June 2002; it was memorable for another reason. It was the World Cup in Japan and South Korea, England played Argentina and won 1 – 0 thanks to a penalty by David Beckham.

I thought I’d write down a few reasons why we bought and let you, the reader, decide whether some, all or none of the factors still apply. This is random in no particular order;

• The climate is great and the sun shines all year round
• It’s two and half hours from home
• The flights are cheap if your dates are flexible
• We love the lifestyle, street markets, restaurants, entertainment, the beach and I could go on
• House prices are cheap compared with the UK
• A second home is for the long term, especially retirement
• The exchange rate is more favourable than it has been
• We needed and easily got a 50% mortgage
• We found someone reliable to look after the place when we are not there, giving peace of mind
• The family think it’s a great idea

I could go on but I think those 10 reasons cover most of why we bought in Spain.

The fundamentals haven’t changed and there are bargains to bought. There is now also plenty of evidence that people like the concept of Rent before you Buy.

So here are three ideas

• Rent before you buy in Spain

• Always get Professional Advice

• BEAT the BANK get better rates for foreign exchange

Viva Espana

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

PS

From the ‘Guardian’ in 2013

Spanish have the HIGHEST healthy life expectancy in Europe

Read the article

Spanish ISD and UK IHT - Comparison

As the old saying goes ‘Like chalk and cheese’

• Impuesto sobre Sucesiones y Donaciones (ISD)

• Inheritance Tax (IHT)

• There is no Double Taxation Treaty or Agreement between Spain and the UK on these inter-linked but very different taxes

This will only be a short article because it is vitally important that you get Professional Advice

What are the principal differences?

	Spanish ISD	UK IHT
Married Couples: When is tax payable?	On First Death	On Second Death
Are Rules applied Nationally?	There are Regional differences but these only apply to Spanish residents. Non-residents only get National rules	Yes, all rules are based on a set of UK laws
Who pays the tax?	The beneficiaries pay any tax due	The Estate of the Deceased pays any tax payable
Does the tax rate change according to who is the beneficiary?	Yes	No
Who pays on what assets?	Spanish resident beneficiaries pay on worldwide assets, whilst non-residents pay only on Spanish sited assets	UK domiciled deceased Estates pay on worldwide assets. Residency is NOT an issue
Will Tax Planning reduce or eliminate the tax payable?	Yes	Yes

Please note that only one answer is common to both ISD and IHT. Tax Planning is vital

Additional reading is also recommended;

ISD in more detail

Spanish Inheritance Tax

Five Spanish Taxes affecting Non-Residents

Non-Resident Taxes

Please email me with any query you may have or to be referred to a Specialist Professional for advice

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Explaining Terms and Expressions - Pensions

Explaining terms & expressions is important but nothing beats Regulated and Qualified Financial Advice

·       Cut through the jargon

·       Check Further Reading

·       Beware: Unauthorised ‘advisers’ about!

A Day
6 April 2006 was the day the UK Government pension simplification rules came into effect.

ASP - Alternatively secured pensions
At the age of 75 an alternatively secured pension would allow an individual withdrawal of income, similar to an unsecured pension fund such as income drawdown

AVCs – Additional Voluntary Contributions
A pension top-up for an occupational pension scheme. The scheme members pay contributions into an arrangement run by the employer to boost the main pension.

FSAVCs – Free-Standing Additional Voluntary Contributions
A pension top-up policy for an occupational pension, but separate from the employer’s pension scheme and normally run by an insurance firm.

CNMV
Comision Nacional del Mercado del Valores is the principal financial services regulator in Spain and responsible for authorising investment products. A CNMV adviser can be recommended, please click here

DGS
Direccion General de Seguros y Fondos de Pensions is the Spanish regulator for insurance products which can be marketed in Spain. Email me to be referred to an authorised adviser

FCA
Took over from the FSA in April 2013. The Financial Conduct Authority is the UK's financial services regulator. The FCA also ‘passports’ authorised advisers to operate in Spain. For a recommended adviser click 

Group Personal Pension
A type of personal pension offered by some employers but not classified as occupational (see money purchase pension).

Lifetime annuity

A lifetime annuity converts money from a pension fund into pension income, which is taxable. There are different types to suit different circumstances and generally treated favourably for tax purposes in Spain.

MiFID
Markets in Financial Instruments Directive is the EU legislation which covers investment intermediaries and their activities. It also enables, for example FCA approved advisers to be' passported' into other EU countries such as Spain .

Money purchase pensions
Some occupational pensions and all personal, group personal, stakeholder, FSAVCs and some AVCs are money purchase pensions. The contributions are invested in, for example, the stockmarket or bonds. The size of the fund depends on the contributions and how well the investments perform. At retirement, there is a choice of options to provide you with a retirement income.

Occupational pension
These are only available through employers and run by pension scheme trustees. There are two types – salary-related (defined benefit) and money purchase (defined contribution).

Pension Liberation
It should be made clear that Pension Liberation is illegal. Typically, unauthorised advisers offer access to your pension before the statutory retirement minimum age of 55. Proven cases attract a penalty of up to 55% of the funds liberated.

Personal pension
A pension policy taken out by an individual from an insurance company or another financial institution and into which personal contributions are made. It may also be offered by employers.

Protected rights pension
This is the part of a pension fund which was used to contract out of the UK State Second Pension (SERPS or S2P) that must be used to buy a protected rights annuity.

QNUPS -  Qualifying Non UK Pension Scheme, which meets the criteria set by the regulations the UK government brought out in February of 2010. This means that for a UK or non-UK resident, there is an opportunity to make contributions to overseas schemes, established as QNUPS, with the knowledge that those funds will be sheltered from UK IHT. Individual advice should be taken in all circumstances from a regulated and authorised adviser. Please email for a recommendation. Also see reading below

QROPS - Qualifying Recognised Overseas Pension Schemes
These became available from A-Day. It is a pension scheme set up outside the UK that is regulated and recognised for tax purposes as a pension scheme in the country in which it is located. QROPS have been established in various countries across the world, many in jurisdictions with beneficial tax rules. For specialist advice click here Also see reading below

Salary-related pension scheme (final salary or defined benefit)
A type of occupational pension. The amount of pension you get is worked out on your salary at or near retirement, or when you left employment, and your pensionable service.

Stakeholder pension
A type of personal pension that has to meet certain standards set by the UK Government. An individual can take one out or it may be available through an employer, but is not classified as occupational. 

State Pension
The UK Pension Service (part of the Department for Work and Pensions) will pay the basic State Pension based on an individual’s National Insurance contribution record. In addition, individuals may also qualify for the State Second Pension based on their own earnings and National Insurance contributions.

State Second Pension
The State Second Pension is an additional State pension paid on top of your basic State Pension. This was called SERPS. Self-employed people cannot build up a State Second Pension.

Tax-free lump sum
More accurately, tax free cash should be called Pension Commencement Lump Sum (PCLS). This is an amount of cash set by tax law which you can take at retirement free of tax under UK rules. Salary-related occupational pension schemes may have different rules on the amount of tax free cash you can take.

Unsecured Pension (Income Drawdown)
This is an alternative to buying an annuity but provides an income whilst the pension is still invested. At age 75, the unsecured pension must cease and be replaced by either a Lifetime Annuity or ASP. For non UK residents or those intending to become non-resident, QROPS could be another alternative.


Pensions Advisers, including the ones that I recommend, will be happy to cut through the jargon. Email me for a recommendation


Further reading

QROPS 2015

QNUPS 

La Torre Fx – Foreign Exchange



David Goodall
Financial Pages in Spain

davidgoodall.spain@gmail.com

Getting a Second Opinion

I recently looked at correspondence received from readers of ‘Financial Pages in Spain’ and can tell you the majority are summarised as;

Can you give me a Second Opinion?

For QROPS, QNUPS, UK Pensions, Investments and tax issues they are unhappy with the advice they have been given and send me examples.

Rather than guesswork people also ask me to recommend Accountants, Lawyers, Surveyors, tax advisers and other professionals. Any professional advice can be sought from ‘Financial Pages in Spain’

Some of the things people have said to me:

• ‘ It  looked like a mass produced report with just my name and personal details changed’

• ‘ They wanted an up front fee even to talk to me, funny they never mention that in their adverts’

• ‘ I was convinced the advice was wrong’ (by the way – it was!)

But they trust ‘Financial Pages in Spain’ and I am receiving comments which show a great deal of respect.

I’ll try to help. Email me

Can you help me to help you?

• Please send me both good and bad examples of reports you have received, from financial advisers, I’ll respect your privacy

• Tell me the names of Advisers who refuse to disclose commissions

• If the fees, charges and commissions are hidden in a report and not openly disclosed, please send examples

This sort of information will help everyone and help eradicate some of the greedy practices.

I may not have intended it when I started out but it seems that Financial Pages in Spain is becoming the respected second opinion.

* * * * * * *

Whatever your query, please write to me. My email is on this link

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Why go to Seminars?

'Free cheese is just a mousetrap'

All of the seminars I see advertised in the Expat Press might be better described as ‘Starting up the Sausage Machine’ It’s time to be aware – the big, impersonal firms call this ‘Seminar Season’.

Let me explain;

The primary purpose for holding the seminar is to maximise on telephone numbers, email and addresses. The more the better! It’s just the start of a predictable process.

The seminar is ‘informative’ but the commencement of a product sale. Imparting knowledge is completely dedicated to the aim of selling a specific product.

You are encouraged, whilst you drink their coffee or eat their cakes to see their ‘local expert’. His title (I’m not sexist but they are) could be all manner of exaggerations like Director, Partner, Regional Manager or Financial Planning Consultant. The only title he won’t have is actually what he really is – Salesman. He’s not an adviser, he doesn’t act as an agent, he represents the company as a salesman.

You complete a Fact Find. Most likely called Financial Planning Questionnaire or something equally pretentious but it comes to the same thing. The salesman will come back to you with a Report, just for you, within two to three weeks.

Remember that the salesman won’t tell you he is giving advice because if it all goes wrong later, somebody else is responsible!

Your Report, the one especially for you, is produced in what can best described as a Factory. It has pre-produced products called reports, which have six or seven changes added to match your circumstances. That’s why you completed the Fact Find, not to give you advice or plan your future requirements but for the Factory to produce your Report.

Most Reports you get will not disclose the commission being paid. This may come as a surprise, as in the UK, mandatory disclosure of commission has existed since 1993. Even if the company is FSA registered, they rarely disclose commission!

The Report may seem very professional but you were part of THEIR PROCESS not YOUR NEEDS.

I regularly recommend advisers and if you want individual financial planning please email me

The advisers I recommend will give you all of the following;

• An individual and appropriate process to establish your needs and an individual recommendation
• Always disclose commission and fully explain the charges associated with their advice
• Give you a NAMED individual who will be your adviser and who is ultimately RESPONSIBLE for the advice given
• Assess your attitude to investment risk and match that to any advice given
• Not charge an up front fee

Give me a few brief details of what you seek and I’ll be happy to make the appropriate recommendation to a Professional, Regulated and Qualified Financial Adviser. Just email me

You may wish to look at some other Posts from my Blog

Getting Professional Advice

http://expatsfrombritain.blogspot.co.uk/2012/01/getting-professional-advice.html

Getting a Second Opinion (important if you’ve had a ‘Report’)

http://expatsfrombritain.blogspot.co.uk/2012/01/getting-second-opinion.html

Tax Avoidance and Tax Evasion

http://expatsfrombritain.blogspot.co.uk/2011/04/tax-avoidance-and-tax-evasion.html

If there is just one major element of the 'Seminar' process it is this - FSA regulated firms who REFUSE to openly disclose commissions & charges - it's YOUR cash. Ask up front if they will declare all the commissions, in their Report. 

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

August 2012 Review – Financial Pages in Spain

On 9^th August 2012, the blog celebrated it’s second anniversary. At the end of the calendar month, I thought I would reflect on the main issues and topics on ‘Financial Pages in Spain’ during August.

• UK Pension Schemes

• QROPS

• QNUPS

These are the issues that contributed the most feedback. I’m always pleased to receive emails either to seek further advice or to comment on my articles.

Using the statistics provided by my service contractor, I can also indicate the most popular posts in terms of the number of people who visited the pages. They were, in order;

1. QROPS – Comparing Jurisdictions

      QROPS (Qualifying Recognised Overseas Pension Schemes) are set up to allow a transfer of UK pension rights, abroad, with the full approval and authority of the UK Tax Authorities (HMRC).

      QROPS - comparing jurisdictions

      QROPS changed significantly from 6^th April 2012, when the UK Tax Authorities (HMRC) altered the rules. The major jurisdictions are now Switzerland, Malta and New Zealand. The new rules have highlighted the need for professional advice. I only recommend fully authorised advisers. Email me for an introduction.

2. QNUPS – Qualifying Non-UK Pension Schemes

QNUPS were brought about in 2010 in a UK Statutory Instrument called ‘The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations. I think it’s important to highlight that because although QNUPS are and must be seen as Pension Schemes, they are often set up alongside Inheritance Tax (IHT) planning.

QNUPS

I was pleased, during the last month, to have my article, in full, repeated by a UK lawyer based in Spain and by a UK SIPP specialist. In order to receive the required specialist advice, please email me.

.

3. UK Pension Scheme or Plan but you live in Spain

Expats with pensions often believe that they are ‘stuck with’ the rules as they understood them in the UK. This post deals with alternatives. Overseas Pensions come in many guises. For example, there are QROPS, QNUPS, International Annuities and Section 615. The first step, however, is to understand what you have got.

UK Pension Schemes

Write me an email , tell me what type of scheme you’ve got and I’ll make sure you are given the right fully authorised advice.

* * * * * * *

Financial Pages in Spain continues to grow, as I can see from the statistics. Whilst Spain and UK dominate the views of both the Website and Blog, there have been readers from 41 other countries including New Zealand, Malta and Switzerland, which is easy to explain but also the USA and Canada!.

Any issues which arise can be answered on an individual basis if you email me. I’m happy to receive questions from anywhere but my real expertise relates to the UK and Spain.

I am happy to take suggestions from readers about future articles. Please email me with your own ideas or issues that you think need raising.

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

Spain – The Sun still Shines

Someone in the UK said to me ‘Not sure I’m going to Spain this year, due to the Economic mess’

The beaches are clean, the Mediterranean is still blue, the food is cheaper than last year, lots of cheap flights, great deals on hotels and apartments but forget all that the headlines are bad!

Spain is still a great place for holidays, working, living and retirement!

We bought our first house in Spain on 7^th June 2002; it was memorable for another reason. It was the World Cup in Japan and South Korea, England played Argentina and won 1 – 0 thanks to a penalty by David Beckham.

We forgot to have our 10 year party!

I thought I’d write down a few reasons why we bought and let you, the reader, decide whether some, all or none of the factors still apply. This is random in no particular order;

• The climate is great and the sun shines all year round
• It’s two and half hours from home
• The flights are cheap if your dates are flexible
• We love the lifestyle, street markets, restaurants, entertainment, the beach and I could go on
• House prices are cheap compared with the UK
• A second home is for the long term, especially retirement
• The exchange rate is favourable
• We needed and easily got a 50% mortgage
• We found someone reliable to look after the place when we are not there, giving peace of mind
• The family think it’s a great idea

I could go on but I think those 10 reasons cover most of why we bought in Spain.

The fundamentals haven’t changed, there are bargains to be bought BUT without question the biggest factor affecting the property market is a LACK OF CONFIDENCE.

So here are three ideas

• Rent before you buy in Spain

http://expatsfrombritain.blogspot.co.uk/2012/02/rent-before-you-buy-in-spain.html

• Always get Professional Advice

http://expatsfrombritain.blogspot.co.uk/2012/01/getting-professional-advice.html

• You can get better rates for foreign exchange

http://expatsfrombritain.blogspot.co.uk/2012/05/unrivalled-foreign-exchange-la-torre-fx.html

Viva Espana

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

March 2012 Review – Financial Pages in Spain

Topical issues

At the end of the calendar month, I like to reflect on the main issues and topics on ‘Financial Pages in Spain’ during March 2012. The issues which were most read during the month covered these subjects

• QROPS

• Professional Advice

• UK Budget

These are the issues that contributed the most readership. I’m always pleased to receive emails either to seek further advice or to comment on my articles.

Using the statistics provided by my service contractor, I can also indicate the most popular posts in terms of the number of people who visited the pages. They were, in order;

1. QROPS

During the month, first through a leak and then confirmed, the new arrangements for Qualifying Recognised Overseas Pension Schemes (QROPS) for 2012, were announced.

These were first trailed in a consultation document in December 2011 and therefore not a great shock. The very best advisers and there providers had already made all of the necessary changes to satisfy the new rules.

New Generation QROPS shows more detail. It is however clear that from now on there will be three major jurisdictions;

      Guernsey

      New Zealand

      Malta

2. Getting Professional Advice

During March, I have been contacted by three expats in Spain who have been victims of appalling advice, bordering on fraud. Had these cases happened in the UK I would have referred them to either the Financial Services Authority (FSA) or the Financial Services Ombudsman.

But Spain is different and largely unregulated. It is still possible to get properly authorised and qualified advice.

     

I regularly refer readers of Financial Pages in Spain to authorised advisers that I have checked out.  Please email me for a referral

I deal, not just with financial advisers but also the following professionals;

·                                             Suitably qualified accountants

·                                             Professional lawyers

·                                             Chartered surveyors in Spain

·                                             Property professionals (AIPP)

·                                             Company formation for property ownership specialists

Getting Professional Advice is the detailed post.

3. UK Budget

I posted two articles on this subject

UK Budget from a Spanish Perspective

Does the UK Government want the elderly to emigrate?

The latter proved controversial !

* * * * * * *

Financial Pages in Spain continues to grow, as I can see from the statistics. Whilst Spain and UK dominate the views of both the Website and Blog, there have been readers from many other countries including Germany, New Zealand, Malta and Canada.

Any issues which arise can be answered on an individual basis if you email me. I’m happy to receive questions from anywhere but my real expertise relates to the UK and Spain.

I am happy to take suggestions from readers about future articles. Please email me with your own ideas or issues that you think need raising.

REMINDER from Financial Pages in Spain

I’ve owned property in Spain since 2002 and hate to think how much I’ve wasted on exorbitant bank charges on foreign exchange of the years!

So I’ve linked up for a new foreign exchange service. It is available in any major currency around the world but doesn’t offer cash transactions. This is a bank to bank arrangement and is priced to beat the major banks.

But you can test it for yourself! Get a quote from your normal supplier, and then get a quote from La Torre Fx.

Even on a transfer from the UK branch to the Spanish branch of my own bank, I made a big saving using La Torre Fx. It costs nothing to get a quote. But if it’s a better deal for YOU the application process is quite straightforward. Check here

Thank you for previous feedback and requests for referral

David Goodall

Financial Pages in Spain

davidgoodall.spain@gmail.com

APRIL 2012 NEWSLETTER