by Mark FR Wilkins, The Rights Group SL
In the same way that removals companies have countdown diaries to help you remember all those important elements needed before the “Big Day”, I felt it would be useful for those seeking to relocate to or acquire a holiday home in Spain, to have a “Check List” featuring those items that required specific attention and which could be ticked off as they were completed.
According to a recent report prepared by Accountants PKF, more than 74% of Britons want to retire abroad. So if you are part of that majority who’s interested in moving to Spain why not consider using The Rights Group’s Check List to aid your smooth relocation?Please “cut out and keep”!
a. Decide which possessions can go to Spain and which can be left or sold back home.
b. Obtain estimates and information from removals companies.
c. List what will be stored and clearly label it – some people even take photographs of the contents and stick them to the outside of the box! Please remember that batteries in kids’ toys, portable radios etc. do tend to corrode and leak if left too long in over heated boxes.
d. Obtain boxes, bubble wrap and masking tape for packaging – you always need more than you think.
e. Check you have nothing at the shoe repairers, dry cleaners, Blockbusters, etc.
f. Check moving dates.
g. Finalise your Spanish purchase. Check that the necessary mortgage funds are released and make a transfer to your Spanish bank account – see below.
If you are moving lock, stock and barrel, you may have the cash already to hand for your Spanish home. However, if you intend to keep your UK property, you will need a loan to purchase in Spain.
Many UK lenders, including some of the biggest names, lend on Spanish properties. You can, as long as you have enough equity in the property, top up your UK arrangements by way of a re-mortgage.
A Spanish mortgage – from a local Spanish lender – is often a cheaper alternative but you will be servicing the mortgage in Euros.
We recommend that you open a Spanish Bank account. In order to transfer money into your new Spanish bank account you can either ask your existing UK bankers to handle the transfer or you can go to one of a number of foreign exchange dealers operating in this market. These companies are often cheaper as they usually charge no transfer fee and their rates are almost always better than the big banks.
h. Redirect mail in the UK through the Post Office.
i. Notify your UK bank, insurance company, life assurance company, health care provider and other financial institutions of your move and provide new contact details.
j. Take final readings for your existing gas, electricity and water accounts. Unless your property is to be retained or rented, arrange for the disconnection of services including phones and broadband. If you are renting, advise your local council tax department.
k. Make final arrangements for your children’s schooling or college places.
l. Make arrangements for your pets to be moved to Spain – please see further below.
m. Notify your Doctor of your move and ensure that you make a record of any long term medication you require – please see further below.
n. Check that all passports and driving licenses are valid.
Personal and Finance
You’ll need to consider your pensions, tax, life assurance, investments and healthcare arrangements in your new home.
Please note that, for example, a UK national, a Dane, a Swede or a Norwegian has the right to live in Spain by virtue of their country’s membership of the European Economic Area.
If you are retiring abroad, you can continue to receive your UK State pension. If you are moving permanently to Spain, you should get yearly increases in your pension.
a. Before you leave the UK, calculate your retirement income by obtaining and completing a form BR19 from the Retirement Pension Forecasting and Advice Unit (RPFA) on 0044(0) 191 218 7585 for a state pension forecast. This is obtainable up to four months before you reach the UK pension age. The forecast you receive, subject to your general entitlement, will tell you what your pension is at the date received and whether or not you will get more by the time you reach UK pension age. Please note if you have already moved, and are paying local Spanish social security payments, then this forecast will not include your local contributions.
b. You should write to The UK Pensions Service informing them that you are moving to Spain and give them your new address. Their address is International Pension Centre, Tyne View Park, Newcastle-upon-Tyne NE98 1BA. Telephone: +44 (0) 191 218 7777; Fax: +44 (0) 191 218 3836.
c. Please note that the state pension age and entitlements may vary between Spain and the UK. To check on your pension rights in Spain we recommend that as a first step you should look at http://www.ukinspain.com/english/ Which is a UK government website dedicated to providing information for those re-locating to Spain from the UK.
d. To obtain your UK State pension in Spain you will need to complete a claim form from the Pensions Service. This is also normally available four months before you reach the UK pensionable age. It asks you if you want to claim a UK retirement pension and for details of any periods of residence and state insurance you have in other countries. If you are living in Spain and claim a pension from that country, the UK Pension Service will pass details of your claim to the Spanish authorities who will process your pension in Spain.
Please note that your country of residence will affect your liability to pay tax on income over the UK personal allowance. Before you retire to Spain you should seek independent tax advice about any benefits to you of offshore banking as this could reduce your tax liability.
You should inform your local social security office, the Inland Revenue National Insurance Contributions Office (International Services) and the Department for Work and Pensions when you move and provide your contact details in Spain.
Personal and company pension schemes can usually be paid anywhere. The experience of others has shown that some company schemes, for example, will pay a pension only to a UK bank. Further, some annuity companies levy charges for each overseas payment, although others do not.
You may consider transferring your pension fund abroad. This would eliminate the Euro/Sterling exchange rate risk if your fund were maintained in Euros. Please note that all such international transfers must receive the prior approval of the Inland Revenue and specialist advice should be obtained from a pensions expert.
Personal circumstances vary greatly but you may cease to be liable to UK tax if you cut all ties with the UK and become domiciled abroad. However you will technically be a UK resident if you spend a requisite number of days in the UK and will consequently suffer UK tax on your income.
a. Obtain more information on tax and your domicile status from the Inland Revenue’s document called IR20.
If you do change your residency, cash held offshore may still be liable to tax in Spain depending on local tax rules. Please note that Spain imposes a wealth tax on your world-wide assets. However, as Spain and the UK have a double taxation treaty you should be given relief for double taxation.
Please remember that if you are proposing to rent out your UK property this will attract a UK income tax charge.
It is essential to ensure that you have a Spanish will (which should be in addition to a UK will). If you have offshore interests you may also wish to consider a will which is specific to that jurisdiction. Make sure that your various wills dovetail and do not contradict each other. It is advisable for both the husband and the wife to have wills – please see below.
Liability to UK Inheritance Tax (IHT) stems from the amount of assets you own and your domicile. The Inland Revenue considers that you are domiciled in the country of your permanent home. Domicile is distinct from nationality, residency or your country of birth. Changing your domicile is often difficult as the Revenue is reluctant to accept that your departure from the UK is permanent. To be certain you’ll need to obtain from the Revenue written confirmation that they acknowledge that you are no longer domiciled in the UK – if that is your aim.
If you’re domiciled in the UK, IHT applies to your assets, wherever in the world they are situated. If you are domiciled abroad, on the other hand, UK inheritance tax applies only to your assets in the UK.
In Spain, you may well be liable to Spanish IHT. You should note that transfers between husband and wife (which are exempt from inheritance tax in the UK) are subject to Spanish IHT following the death of either party.
Capital gains tax (CGT)
This depends on whether you’re retiring abroad permanently or just buying a holiday home. UK residents are liable to CGT on their world-wide assets, so if you sell your holiday home it will be subject to CGT in the UK and may well be subject to a payment to the Spanish Tax Office or “Hacienda”. The effect of this may be neutralised by double taxation Treaty relief.
It is prudent to ensure that all UK life assurances are maintained through payment from a UK bank account. In addition, as a change in residency or domicile may constitute a material change it should be disclosed to your life assurance provider in writing.
Please note that existing arrangements such as the tax-free status of existing UK investments, PEPs and ISAs, continue to apply, but in ceasing to be a UK tax resident you will have to reduce contributions into them. You will also need to obtain special local advice to establish whether you will become liable to tax on the income from these investments in Spain.
Generally we would recommend that you should seek the assistance of an expert financial adviser to establish what to do about your investments and the best ways to minimise income and capital gains tax.
One of the most important factors to take into account if you are moving to Spain is your long-term healthcare. Collect and complete the E121 form from the Department of Health which covers UK citizens receiving the state pension for some health costs.
However, you may still find yourself paying substantial additional costs. As a consequence many retirees to Spain take out a comprehensive medical and dental policy.
The Department for Work and Pensions will be able to advise on your rights in Spain – http://www.dwp.gov.uk/lifeevent/penret/pr_visit_or_living_abroad.asp
If you are going abroad and wish to take your pet cat or dog with you, the Pet Travel Scheme (PETS) could allow you to avoid long quarantine periods.
Working guide and hearing dogs may also travel on the scheme. Spain is a participating country in PETS. To be eligible, your cat or dog must meet the requirements of the scheme and travel via certain designated air routes.
You can get more advice about the PETS scheme from
Pet Travel Scheme Helpline
Department for Environment,
Food and Rural Affairs,
1a Page Street
London SW1P 4PQ
Tel: +44 (0)870 241 1710
You have just completed the first steps towards a more exciting and varied life. Congratulations, see you by the pool!