SRE

Residency & Tax
Currently I am a non-resident in Spain, basically splitting the year between Spain, the UK and France.
I have been told that as I spend circa 183 days in Spain that I automatically become a Tax resident, not problem to me, I will be law abiding and pay my tax here in Spain or so I thought, however it is not that simple.
Like many people in Spain, my income is from the UK, private pensions and investments etc. etc.
I still have all of my family in the UK, I still have my UK home and car and I want to keep them, as I also intend to retain my membership at my local golf club. (This crops up later)
I had a talk to very helpful lady in the UK tax office and gave honest answers to everything, even about being a member of my golf club.
Now for the interesting part, according to the UK, I am still a UK tax resident as I spend well over 90 days a year in the UK, plus I have my home and they checked, I am on the electoral roll. Furthermore, I still have my car, income, investments etc. in the UK and this is the hard one, membership to my golf club in the UK???
I have now been advised by my legal bod in Spain who sorts out my non-resident taxes, that this is not an issue and that basically I am governed by what he calls, Duel resident and Tie-Breaker-Rules and that all I need to do is do is take out residencia, submit an annual tax return in Spain identifying taxes paid in the UK. However he has requested I obtain a Certificate of UK tax residence from the UK. He also informs me that as the UK tax authority has made this ruling, it will be virtually impossible to change unless I sell all of my UK possessions, including my UK house etc.
Can I ask, has anyone else come across this?
A little Google searching flagged up Robert Gaines-Cooper, now this is an issue to be a tad concerned over.
Maybe this is why so many people live in Spain as non-residents.
Any advice please?
Thanks in advance

Fred James

It sounds complicated but it's simpler than it looks.

If you spend over 183 days in Spain in one calendar year you are, de facto, tax resident in Spain.

The problem arises if you hover between the UK France and Spain and are not tax resident (under the 183 day rule) in any of the three.

Under these circumstance HMRC in the UK may still consider you to be UK tax resident under the 90 day rule and even then using the arguments they used in the Gains-Cooper case you could still be considered tax resident in the UK with less that 90 days spent there.

However, HMRC is trying hard to get the Gains-Cooper rules through the Supreme Court but, as yet, as still waiting for a ruling. Gains-Cooper is a man who lives in a tax haven and pays no tax. As such HMRC are trying to claim he is tax resident in the UK.

Your case is totally different if your really do spend 183 days in Spain as you are then tax resident in a country (Spain) that has a dual taxation treaty with the UK.

As such you will be judged to be primarily tax resident in Spain even though you are also (potentialy) tax resident in the UK. If you did not spend 183 days in Spain, because of your family circumstance and things like the golf club etc, you would almost certainly be regarded as UK tax resident even if you spent less than 90 days in the UK, unless you were resident say in France or another country.

I remember when I was trying to persuade HMRC that I wasn't tax resident because I spent most of my time sailing around various countries. Their comment was "If you want to get off our hook you will need to prove that you are now on someone else's hook" Very succinct!

Any tax you pay in the UK can be offset against any tax you pay in Spain. I am not sure why you have been advised to get a UK tax residency certificate. It would be better to get a Spanish tax residency certificate and submit that to HMRC. They might then be prepared to allow your UK pension and possibly some of the investment income to be paid free of tax in which case it could save you some money and also make life a bit simpler.

YMF

It has always been a complicated area but even more so if you work for a UK employer or earn your income in the UK but live in Spain.

The UK Government think it is complicated too and have just issued a consultation paper on "Statutory definition of tax residence" You can read about the proposed changes here

Fred James

But none of this is relevant if you spend more than 183 days in Spain as the double taxation treaty overides all these new proposals.

SRE

Sorry Fred
Just completed the Interactive online tool (Excel 322KB) , and they say I am a UK tax resident this year.

Blows the 183 days a year out of the water.

Fred James

Not at all. The whole point is that you can be tax resident in both the UK and Spain under their respective rules which is what you found.

The point of the double taxation treaty is to decide who has first call on the tax.

If you work in the UK then the income will always be taxed in the UK irrespective of residency. The double taxation treaty allows you to offset one countries tax against the other. UK pension and investment income is different as HMRC are prepared to pay it gross under certain circumstances.

The Gains-Cooper case and the subsequent stuff being issued by HMRC is designed to clobber people who "could" be considered to be UK resident but who are hiding in non treaty countries and paying little or no tax to anyone.

In reality it has very little impact on us lesser mortals.

SRE

I guess the problem is making a clean break from the UK, not always that simple.
One thing for sure, I bet I am not the only one who gets caught up by both the latest UK rules and the historic Spanish rules.

EsuriJohn

Fred. Do you mean that Gains-cooper is appealing an in house HMRC ruling.

If he does spend the min 183 days in Spain and gets the FD9 stamped by the Hacienda in Spain and accepted by HMRC then any Private pension in payment that is by the way of an annuity is very favourably treated in Spain if exported tax free from UK. In addition he has a personal allowance in both countries so he will be at least that amount x 20% better off. I agree that would be a better way to do it.

The question of DOMICILE and IHT is an impossible nut to crack but deft footwork can mean that taxes can be mitigated whilst alive.

I still have a UK car with me as registered keeper so that will be changed next month and the other one is here waiting matriculation.

I thought you could remain on the Electoral role for 15yrs after you first left UK. Have HMRC changed that as well.

EsuriJohn

I just did it too and it got me about right and the Hacienda & HMRC have both accepted my FD9 after about 2 years. I agree with Fred it,s not the likes of us they are after its the Greens, Gains-cooper they want to get, makes it all worthwhile

Fred James

Yes he is. It has nothing to do with Spain. He lived in the Seychelles.

Google Gains-Cooper and you will find all you need. By the way, HMRC are chasing £30m in back tax.

Here's a starter.

http://business.timesonline.co.uk/to...cle7029806.ece

There is a good article from Blevins Franks at:-

http://ewnbusiness.com/475/tie-break...-tax-residency

SRE

Big Snip

There is a good article from Blevins Franks at:-

http://ewnbusiness.com/475/tie-break...-tax-residency[/QUOTE]

This article basically states what the UK tax office has told me.

Guess I will be a Spanish resident paying all my tax in the UK as long as I have my home in the UK, or untill the rule/laws are agreed across europe.

Fred James

Yes you will stay tax resident in the UK but as your Spanish advisor said, you may still choose to submit a Spanish tax return net of any UK tax paid.

This is particularly important if ultimately you sell any property in Spain and wish to minimise CGT and also IHT on any Spanish assets.

A & M

Gaines-Cooper lost in the Court of Appeal but was given permission last August to appeal to the Supreme Court. I think the basis on which the Revenue won in the C of A was essentially that in order to lose UK tax residence, you have to sever all ties, both family and financial, with the UK (but don't count on this, I'm not a tax lawyer!). This was a different argument to the ones HMRC had used before, which is why Mr. Gaines-Cooper was awarded most of his legal costs even though he lost! I don't know when the Supreme Court will be hearing the appeal but probably not until the autumn at least.