uk or spanish tax

 DOWNLOAD THE FORM FROM THE HMRC WEBSITE FILL IT I POST IT AND SIT BACK AND RELAX IS WHAT I DID

Filling the form FD 9 from HMRC for myself and another for my wife (Civil Servant and Teacher) made absolutely no difference to our tax position with regards to our Government Pensions. It did of course enable us to export our State Pensions before tax and we clearly understand that these then become taxable in Spain.

 HAVE IT PAID INTO A UK BANK AND DONT PUT INTO SPANISH BANK AND GUESS WHAT NOBODY KNOWS HENCE NO TA ANYWHERE

Do you understand the difference between a Government Pension and a State Pension?

It's easy to see how confusion occurs. State Retirement Pension is of course a Government pension paid to anyone who has contributed enough NIC, then there are the various pensions paid to government employees, be it civil service, military etc. they too are a Government pension so perhaps it would help if people actually specified the scheme they are talking about, ie. Civil Service pension or State Retirement pension rather 'Government'' pension which could be either.

I am not sure whether I should have started another thread or not?

Reading, what to my uneducated financial brain is a minefield, in the last load of posts, I thought I would mention my position!

I was told, by several people, including bank managers, in the past, that if I pay tax on my pensions (one State and two small private) in the UK, I do not have to declare in Spain.

That is untrue, I now know! I am resident here permanently and decided I wanted to be legal for tax purposes.

I admit my documents leave a lot to be desired but I do not throw much away, so I decided to visit an English speaking Spanish adviser, for help.

I have lived here since 2004 and have held residency since then. My adviser prepared a declaration for 2009 and presented it to the Hacienda in Murcia, only to have it rejected, stating they wanted to see earlier years as well.

I have never been "chased" here and any inversions made had the tax deducted upon maturity. I suppose without realising it, I was flying under the radar!!

Anyway, I have managed to obtain all the necessary fiscal statements from the UK for previous years and will probably have to pay a fine for non-declaration? I know ignorance is no excuse but that is what is was.

I have filled in the two forms to avoid double taxation but would you believe, I have had a tax refund for 2009 and was told I should not be a taxpayer at all.

My question is, has anybody been through a similar situation and if so, was it complicated to be resolved?

Hi Pilgrim,

I think I might be in a similar situation to you but just 2 years behind thats how long it has taken to get the paperwork signed up and returned by the Hacienda here and accepted by HMRC in Cardiff.  You don't make it clear  which tax authority made the refund but I suspect it was HMRC since you should not have been paying tax in UK from the date you became a fiscal resident in Spain (even though you did not know that you were). However you may be liable for tax in Spain for the same period. Two things help here I believe the Spanish system can be more generous to pensioners and if it is not deliberate fraud they only chase back 4 years.

This message was last edited by JohnKath on 01/05/2011.

The situation is very complicated, but I have a question for Amep75: if I am not liable to UK income tax after 6 months in Spain, why have HM Revenue and Customs sent me a tax demand for tax year 2008-09, even though we moved to Spain at the beginning of that tax year?!   To be fair, even though we told them that we had moved here, we haven't returned the FD9 form yet.  We are in the process of doing a tax declaration for 2010, and have been told by our adviser that once that has been returned (hopefully!) the Hacienda will stamp our form.  We may then have to complete tax declarations for previous years.  I will try and remember to post updates on here.

I am in receipt of a State Retirement Pension and small private pension, both of which are paid directly into my Spanish bank account.  I also receive a civil service pension and a tiny private pension (just over £24 per month), both of which are paid into my UK bank account.  I'm not 100% sure whether I will be better off with tax residency here, though I suspect my husband will be, especially as he is over 65 so has higher allowances!

Pilgrim, I would be interested in further updates from you.  Plus anybody else in similar circumstances.

Sue

SueMac

I gather from what you have said previously that you live in Spain on a permanent basis, or at least for 6 months a year. Whether you have liability in the UK (which you have as a civil service pensioner (even though you may not be liable to tax if your personal allowances cover it)) then you are tax resident in Spain in any event and cannot avoid it.

The fact that you have received a demand form HMRC does not, of course, mean that it is accurate. If you are still in the process of the FD9 procedure, you can lodge an appeal against the assessment on those grounds, certainly if it includes any non-civil service pension income. There may be some residual liability to UK tax on any income arising in the period before you left.

If your non-UK-liable income exceeds the Spanish allowances (and bear in mind that you can opt for the most advantageous way to submit returns) you should have made a return for 2009 in 2010, between May and July. Any late submission prompts a penalty (which I believe is in the order of €200, but don't quote me on that figure!)

Hi Suemac,

You are liable for UK income tax  when you are DOMICILED in UK and have not filed and had accepted the Form FD9. To shift your domicile is very very difficult. Domicile will always leave you liable to IHT wherever you are tax resident. However you also become tax resident in Spain if you live here for 6mths in any tax year. This is where the Double taxation Treaty comes into play. You cannot choose where you pay tax it will be determined by the treaty. It gets ever more complex the longer you study the problem. The UK residence requirement is only 90 days so the DTT forms a tie break in difficult cases but is possible to be tax resident in both jurisdictions. You have to fill out form Modelo 030 for Spain and then they will address the FD9 when you submit it to them.

In Spain you can be taxed as an individual or as a couple and in your case it may be that opting to be taxed as a couple where your Government Pension is taxed in UK with full single persons allowance and your small private pension (if paid as an annuity is treated favorably in Spain) + State Pension are added to you husbands income (pensions are treated as income in Spain) and taxed together. You will get the higher single allowance for your husband with an additional amount added for you but it is not twice the single allowance

I'd like to add another dimension to the above which may, or may not, be relevant.

My husband has a pension from his old employers - well 2 in fact - which are classed as "OCCUPATIONAL PENSIONS". We were told by HMRC that these could not be transferred to Spain for tax purposes and had to remain taxable in the UK. They very helpfully provided us with appropriate documentation in English and Spanish to show that he is still a UK Resident for tax purposes under the double taxation treaty.

Added together they are below the UK tax allowances so obviously no tax is paid anyway. Both companies will pay in either sterling or euro to

Can anyone confirm whether this is still the case and whether the treatment of occupational pensions is still the same or not?

Government Pensions :- Civil Servants, Teachers, Local Government Officers, Military Personel, Police, ex Coal Board, ex Nuclear Energy lots of arms length Agencies and some National Health Service are all occupational pensions and are by UK law taxed at source. This is still the case.

Your husband could have his State Pension paid tax free in UK and transfered to Spain where it would be liable tax  but below the personal allowance so you would pay no tax.

The term 'occupational pension' also applies to pensions paid by private companies too, just as the term Government pensions can refer to public service pensions (occupational) and state retirement pension, they are all Government pensions.  So again people need to be specific in order to get the correct information as public service pensions are treated differently to other occupational pensions by HMRC.

My husband's pensions is not a government occupational pension - but from private companies.

No state pension yet I'm afraid! We retired at 50!

Hi poppyseed I never refer to State Retirement Pension as a Government Pension so that in a post I can use shorthand GP and SP to differentiate between them. I am well aware that some private sector pensions are classified as occupational pnsions, the banks, M & S and others previously offered these as final salary schemes and I suspect the rules on payment determined by the trustees are influenced by the fact that no tax would be paid on money going into the scheme either from the employer or employee and in addition the employee would be opted out of government second pension (and its predecessors). This may be why the HMRC has said it should be taxed at source but unless it is paid from Government funds I would still think that the Trustees have the final say.

Pommers

I would ask the clerk, who said that you could not transfer the relevant pensions to Spain for tax, for chapter and verse. From what you describe, I would say he/she gave you incorrect information. Of course if you are still resident in UK for the relevant period, they may well be right, and you are possibly caught in a double-resident situation.

Hi JohnKath

I'm sorry if I seem to be being pedantic but when people are asking for advice on pensions and tax I feel it is really important to be specific so there is little or no room for misunderstanding and although you may understand what you mean by GP and SP not everyone else will !

Although there were  incentives for people who opted out of SERPS now called SP2 this in effect reduced their additonal STATE pension the reasoning being that private schemes would perform better and pay out more than SERPS/SP2, duff information it now seems in many cases. I don't think there is any reason to prevent private occupational pensions to be paid gross provided the necessary paperwork is obtained and submitted to HMRC. The following information is from a website offering pension advice.

STATE PENSION – State pensions are paid gross and are taxed in Spain once the taxpayer becomes resident for tax purposes.
 

OCCUPATIONAL PENSION – Occupational pensions are taxed in Spain once the taxpayer becomes resident. It is also possible for occupational pensions to be paid gross. Normally to have pensions paid gross it is necessary to request a certificate of fiscal residency from the Spanish tax office and submit that certificate to the appropriate tax office dealing with the tax affairs of non-residents in one’s home country.
 

GOVERNMENT SERVICE PENSION – Government service pensions (such as civil service, local authority, police, fire, teachers, but not NHS) are taxed in country of origin only and are not further liable to Spanish tax.
 

A link to that website would be useful they obviously know the difference between a Government Pension (GP) and a State Pension (SP).

I am even older than SERPS or SP2 and my Graduated Retirement Benefit is a welcome addition to my weekly State Pension earned after 45 years work and what could be the lowest relative to average earnings in western Europe.

http://www.malagalaw.com/news/guides/taxationpensionincomespain.asp