billgates

I've been living in Spain for the last 18 months but still work for a UK company. I'm a computer programmer and work from home writing software for this company and up until now I've been informed that as I work for a UK company I come under the UK tax and insurance PAYE system. Spain gets its cut via the reciprocal dual taxation agreement between the UK and Spain.

However, after 18 months of paying UK tax and NI I have been informed by the good and wise people at Newcastle that I should now be paying Spanish NI.

I forwarded this letter to the wages dept at my company in UK. As a sweetener they have reimbursed me with my entire NI contributions for 2006 and a footnote along the lines of "Merry Christmas".

Now this lump sum in my bank account is very tempting. My wife has already spent it in her head. Unfortunately, alarm bells are ringing.

For a start we receive tax credits and child benefit through the UK system. What happens with this? Will this have to be repaid?

Will I have to pay back-pay of Spanish NI for 2006?

Can I just go out and spend all this money (which is what I really want to do) safe and assured that it can't be claimed back?

Is there anyone on this board that has some knowledge about the UK/Spanish tax/NI system or should I seek the advise of "someone in the know".

Cheers.

Mercedes

Although you are working for a UK company you really are a fiscal resident in Spain. The best advice is to have a chat to your taxation office and explain your situation, they will probably reduce your taxation or you only have to pay it in Spain since you are for all intent of purposes actually working in Spain. I wouldn't spend anything until you talk to an accountant who knows about the taxation in both countries and can advise. Not all accountants are upto speed with the laws, so be careful, you don't want any nasty surprises in the future due to an incompentant accountant. Mistakes often fall back on you if they screw up.

Hope it helps.

Fred James

Generally speaking, since you are a resident of Spain your income must be taxed in Spain irrespective of who you work for or who pays you.

Clearly the DSS consider you to be non resident as they are not asking for contributions.

Your tax bill in Spain for 2006 is not due until June 2007 and it may be possible to get a rebate of your UK tax for 2006 or at least, offset it against your Spanish tax under the dual taxation agreement.

As Mercedes has said, you need to talk to an expert who understands both taxation systems (not always easy to find!)

Meanwhile you might find these two publications useful.

http://www.hmrc.gov.uk/pdfs/ir20.pdf
http://www.hmrc.gov.uk/pdfs/nico/ni38.pdf

Miss Naughty

Hi,
This is why i get myself in trouble, i would be like you wife and i would be spending it. And then worry about it later on

However with a sensible head on i would do as the other's have said and actually go to someone in tax in spain

EsuriJohn

Hi billgates,

I think both Fred and Mercedes are much more expert than me but they did not comment on your benefits. My thoughts are that you will at some stage lose these benefits but since you are still paying UK tax perhaps just not yet.

To maintain your health cover you will need to be paying into the Spanish NI system but you may best doing this as "self employed" so don't spend the money yet.

If you got your E106 before you moved out here you should be OK for 2 years or so but after that Newcastle may disown you so you will have to straighten that side of things out.

Regards,

John.

YMF

Hi
The tax situation is fairly straightforward but the NI is not, you may find it helpful to look at this previous thread:
Social Security

We have spoken to spanish employment experts and are still no further forward. If the situation was reversed you can direct pay into the UK system, Newcastle did admit that doing that was very complicated so, as you can imagine working it out in spain is virtually impossible!

Newcastle eventually gave us contact details for the spanish office that deals with the social security for expats, we have now written to them and are awaiting a reply.

Yvonne

Chiclanagir

Re the child benefit. Have just read a booklet from Newcastle and they state that you are not entitled to child benefit when the child is living permanently out of the UK. Also that you are supposed to hand your medical card back.