UK Financial Advisers With Clients Living in Spain and other EU countries

We wrote an article recently detailing that many British nationals living in Spain and other EU countries, have received letters from their UK banks telling them that their accounts will be closed at the end of 2020.  This due to no Brexit trade deal having been agreed.  

That article explained the impact of no Brexit trade deal on financial services providers in the UK.  After 31st December 2020, these service providers will not legally be able to carry on providing services to their expat clients who reside in Spain or other EU countries.

The Brexit transition period ends at the end of the year, and with it the financial services licence EU ‘passporting’ rights which allow UK firms to provide financial services in EU countries. 

As a result many providers, including Financial Advisers, are withdrawing their services as advisers where their client is a UK national living in the EU.  It is only a small minority of financial service providers that have taken the necessary steps to establish themselves in the EU so they can continue providing their services. 

It is therefore quite likely that from 2021, most expats living in Spain or other EU countries will not be able to receive advice or services from their UK Financial Adviser.  Clients and advisers alike who are affected by this, should be acting now to make alternative financial arrangements. 

UK Financial Advisers and Advice in the EU After the Transition Period

The UK is unlikely to get any special access to the EU over and above any other third country.  That was a benefit of being in the EU.

Any UK IFA firm that wishes to carry on business with clients in an EU country such as Spain, will need to be authorised by the regulator of that country to be able to do so.

The options an adviser may have are to:

  • Get approved to advise in the EU country in which they have clients
  • Partner up with a firm that is already established in the EU
  • ‘Sell’ their EU based client to an EU firm of advisers

Getting a financial services licence, is not a quick or straight forward process, and it’s not cheap either, so this will not be viable for most UK financial advisers.  This means that many Brits living in Spain and other EU countries who currently have UK financial advisers, will need to find new one.

Brits In Spain With UK Financial Advisers

If you live in Spain and have a UK Financial Adviser, there is a good chance that they are not going to be able to legally carry on as your adviser next year.  If they have told you they can, you should ask them to provide you with confirmation of the EU permission that they have obtained.

We have heard of UK advisers that have told their clients that they just need to just use the UK address of a friend or family.  The issue cannot be fixed by pretending you live in the UK.  If your adviser is not licenced to advise in Spain their Professional Indemnity Insurance will not cover their advice or services.  The UK regulator and their insurance provider would certainly take action, if they became aware of advisers doing this.

If you are affected by this or think you may be, and haven’t already spoken to your UK financial adviser you should do so.  If you’re not sure what to do or need to find adviser in Spain, we can recommend firms and advisers who are licenced to advise in the UK, Spain and other EU countries.

Please feel free to get in touch and ask to speak to one of our Financial Services Advisers.

Contact Us

Phone & WhatsApp (+34) 951 77 55 44 / (+44) 033 000 10 777

 

 

 

UK Banks To Close Accounts & Withdraw Services for Brits Living in the EU

The UK press and expat papers in Spain have all carried articles warning that thousands of Brits living in the EU will have their UK bank accounts closed by the end of the year.

In the UK the The Daily Mail, The Guardian, The Times and The Daily Telegraph to name a few, have all detailed how banks including Lloyds, Barclays and even the Queen’s bankers Coutts, will be closing expat accounts and withdrawing services.  The reason for this is the UK’s failure to agree a post-Brexit trade deal to allow cross border Financial Services to continue.

Banks are having to make decisions as to which EU countries to pull out of and which to continue operating in.

Lloyds Bank confirmed to The Sunday Times that it will be withdrawing services from Holland, Slovakia, Germany, Ireland, Italy and Portugal – a move that will affect 13,000 British customers.

The bank, which is Britain’s biggest banking group, started writing to its customers living in these countries since August, telling them that their UK bank accounts would be shut on December 31.

Barclays also confirmed that its banking and credit-card customers living in the EU had started receiving letters.

Why Are UK Banks Closing Accounts & Withdrawing Services for Brits Living in the EU?

Until now the UK banks and other financial service providers have been able to use the EU ‘passporting’ system to provide services to customers living in other EU countries.  In the absence of a Brexit trade deal, the UK will no longer be able to use the passporting system,  This means when the transition period ends, it will become illegal for UK banks and other financial service providers to offer their services to British customers living in EU countries unless they have a licence in each country to do so.

Given the relatively small amount of customers that UK banks have that live in the EU, for most UK banks and other financial service providers, it is not commercially viable to go through the process of obtaining licences and establishing branches in each EU country where they have British expat customers.

Which UK Banks Are Closing Accounts and What Services Are Being Withdrawn?

All the major UK Banks have either already confirmed that they will be closing expats accounts and withdrawing services, or are in the process of reviewing the services that they offer.  Closures will affect current and savings accounts, ISA’s, credit cards and investment accounts.

It is not just bank accounts that are affected.  Customers are also having their credit card facilities withdrawn.  And its not just banks that will not be able to continue offering services.  All financial service providers will lose the ability to serve customers in living in EU countries, unless they have opened up shop in each country where the want to provide their services.  This includes insurance providers, investment companies and firms who provide financial advice.

Will Any Banks or Other Financial Service Providers Continue Offering Services?

Most banks have already made the decision not to continue offering services in the EU.  The decisions are simply based on the commercials.  If it’s not commercially viable for big banks with thousands of customers in the EU, to continue operating, then the same will apply to other financial services providers.  Not least financial advisers.

Many Brits who moved to Spain have kept their UK financial advisers.  This is understandable given that they will usually have had a relationship with them for many years and can therefore rely on them and trust them.  The vast majority of UK financial advisers will will not have the means or justification, to go to the expense of setting themselves up in Spain, to continue servicing a few clients who live there.

The reality is that many thousands of Brits throughout Spain and the EU, stand to be abandoned by their UK banks, financial advisers and other service providers due to Brexit.

Read more about UK Financial Advisers and their EU resident clients post Brexit.

What Do Should I do If My UK Banks or Financial Service Provider is Unable to Provide Services in the EU?

A short term measure could be to use the address of a friend or family member.  This could help you keep your account open for the time being giving you some time to plan and sort out new arrangements. If you do this, it’s important that you check the terms of the the accounts that you have.  Most accounts that include a credit facility, (overdraft, credit card etc), actually require you to be resident in the UK, not just have a UK address.

It really does depend on your situation, and the reason why you use the account provided by your UK bank.  If you need an account denominated in GBP (pounds), to make and receive payments, then online account providers like for example Revolut, may have a solution.  They offer accounts in the main currencies including GBP, and support direct debits in both EUR and GBP.

Some Spanish banks also offer GBP accounts, and there are also a few international banks such as Standard Bank, that provide accounts in all the main currencies.  With the advent of online banks, it’s also quite easy to open accounts with EU online banks, so there are quite a few options to set up alternative banking arrangements.

One thing to also be aware of is that come 1st January, Spanish banks will be able to charge to receive payments from UK banks, so it’s worthwhile taking the time now to fully review your banking setup.

Of course, whilst there are options, when relationships stretch back many decades and your banking has been a habit of a lifetime, being abandoned is a bitter pill to swallow.

If you are affected by this or think you may be, the first thing you should do is contact your UK bank or financial adviser to find out where you stand.  If you then need to set up new banking arrangements, it’s advisable to do so without delay.

If you’re not sure what this means to you, whether you’re affected, or not sure what to do and would like to speak to a professional who can guide and advise you, please feel free to get in touch and ask to speak to one of our Financial Services Advisers.

Contact Us

Phone & WhatsApp (+34) 951 77 55 44 / (+44) 033 000 10 777

Tax in Spain for Residents and Non-Residents

Understanding tax in Spain is essential, not just if you live here, but also if you own a property in Spain.

The Spanish tax year runs from 1st of January to 31st December.  Residents have to complete their income tax return, declaracion de la renta, by 30th of June the following year, and non-residents have until 31st December.

Spain has a double taxation treaty with the UK, which means you can avoid getting taxed twice on the same income.

Resident or Non-Resident for Tax in Spain?

You are considered to be tax resident in Spain if any of the following apply:

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What is Modelo 720?

Modelo 720 is the form which has to be completed by Spanish residents to declare overseas assets to the Tax Authorities.  The requirement applies to anyone who lives in Spain, who owns, or is beneficiary to overseas assets worth €50,000 or more.

The Modelo 720 overseas assets reporting requirement, was introduced to clamp down on tax fraud being committed by Spanish residents who have acquired, or intend to acquire, assets, and or hide wealth outside of Spain in order to evade paying tax.  You can read more about this in our article – Overseas Assets Declaration.

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Can I keep my ISA’s when I move to Spain?

ISA’s are very tax efficient ways to save or invest, as you pay no tax on savings interest, (not that you get any these days), and virtually no tax on investment returns. They are therefore usually the first type of saving or investment account that people will have.  For this reason, and the fact that there is a generous annual allowance to save into them, you like many other may have built up sizeable amounts in ISA’s.

You may also have reached, or be approaching retirement, and relying on this tax efficient ISA nest egg, to provide extra income to supplement your pension.  For some, an ISA may even be their ‘pension’.

ISA’s and moving to Spain

So if you’re moving, or have moved to Spain, can you keep your ISA?  The short answer is yes.  According to gov.uk:

If you open an Individual Savings Account (ISA) in the UK and then move abroad, you can’t put money into it after the tax year that you move (unless you’re a Crown employee working overseas or their spouse or civil partner).

You must tell your ISA provider as soon as you stop being a UK resident.

However, you can keep your ISA open and you’ll still get UK tax relief on money and investments held in it.

You can pay into your ISA again if you return and become a UK resident 

Great – you can keep your ISA, and continue to benefit from it’s tax efficiency!  Well not exactly.  When you move from the UK to Spain, you also move from the UK tax system to Spain’s tax system.  So you will continue to get UK tax relief, however your ISA will (or should), get Spanish tax treatment.

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What is QROPS?

QROPS – Qualifying Recognised Overseas Pension Scheme.

A QROPS, or Qualifying Recognised Overseas Pension Scheme, is an overseas pension scheme that HM Revenue & Customs (HMRC) recognises as eligible to receive transfers from registered UK pension schemes.

To gain qualifying status, the scheme must meet the requirements set by UK law, and have notified HM Revenue and Customs (HMRC) that they meet the conditions to be a Recognised Overseas Pension Scheme, (ROPS).  To find out if a pension is a recognised by HMRC, you can check their ‘ROPS’, list.

QROPS were born as part of UK legislation on 6 April 2006. The legislation itself was as a direct result of EU human rights requirements, i.e. it had been challenged that an individual living in the EU who had a UK pension, was not able to move it to a scheme in the country in which they reside or any other EU country for that matter, which was contrary to the rights afforded by the EU founding principles of freedom – movement of people, capital, goods, and provision of services.

Who can have a QROPS?

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Inheritance Law

Of all the issues that we provide information about on this site, inheritance law in Spain, is one of the most complex and we strongly advise anyone concerned about their affairs relating to this area to seek professional advice.

In the European Union alone, every member state has different laws in relation to death, inheritance and inheritance tax. They are usually in constant change and are complex. To have to encounter and work with them at the moment of loss of a family member or friend is extremely stressful and you may get lost in a quagmire if you try to do it on your own.

Similarly in making a Will for your self, if you have assets in Spain as well as your country of your nationality, matters can get very complicated.

Some basic information –

Before 2012, inheritance law in Spain stipulated that, in the case of a foreigner deceased, the law to regulate her or his inheritance would be the law of their nationality.

So, in theory, the position was relatively simple: UK inheritance law was used to regulate the inheritance from UK nationals who die owning property in Spain. In the same way, Swiss law is called to regulate the inheritance from a Swiss national who dies owning property in Spain etc.

However there were contradictions in this system, which created confusion and conflicts. For example, UK inheritance law provides that the disposal of immovable assets (land and buildings, household and personal goods) abroad is governed by the law of the country where the property is situated and the disposal in inheritance of movable assets (bank accounts, life insurances, cars, boats/yachts, shares, bonds and other investments), is governed by the law from country of the last domicile.

French law confirms the inheritance law of the country where the deceased had the last domicile or residence. Similarly, Denmark Belgium, Switzerland, Finland, Germany, Sweden, Norway.

Why is it important to identify which inheritance law is applied to the estate?

Because there are critical differences between the Spanish and laws from other countries regarding wills and inheritance. The most important difference is that the Spanish have the figure of the “Compulsory” or “Obligatory Heirs” (Herederos Forzosos), which means that the testator cannot dispose from the full inheritance freely, and in whatever circumstances, he must leave the 66% of his inheritance for determinate persons called Obligatory Heirs (mainly descendants and spouses).

This system of “Obligatory Heirs” is common in countries like France, Belgium, Switzerland, Germany, Norway, Denmark, Sweden, Iceland, Norway, and Russia, in which the testator has the obligation to leave a percentage of their assets to determinate inheritors (usually surviving spouses and children). But, this system is different in the UK and USA.

In this way, for example, UK Inheritance law allows the free disposal of assets, transferring with total freedom the inheritance at the entire wish of the person.  The testator has total freedom to leave whatever he/she wishes, to whomever he/she wishes.

With this system, it could happen that a UK citizen, with two sons owning a property in Spain, can make a Spanish Will leaving their property in Spain to their surviving spouse, and that this last Will cannot be executed because, if Spanish laws are applied, then 50% of that property should be transferred to the spouse, for the other 50%:

  • One-third is divided between surviving children in equal shares.
  • One-third is reserved for surviving children but can be distributed equally or unequally according to instructions in a will. (The surviving spouse retains a ‘life interest’ (usufruct) in this part of the estate and the children do not inherit until the spouse dies.
  • One-third can be disposed of freely in a will.

Current legislation effective since August 2015 offers 2 options:

Option 1: You decide the law which will govern your inheritance.

So, if you are French, British, German, Norwegian, etc., you can decide on your Will or Probate, which the law you want to be applied on your passing.

Option 2: Inheritance by country of permanent residence.

If you have not stipulated in your Will, anything in relation to the law that you wished to regulate your inheritance, then, Option 2 will be applied and defined as country in which you had you residence during the last 5 years.

In cases in which you have been living in different places, and/or the permanent residence is not clear, then, the law will be the one from the country in which you had the strongest connection during all your life – open to subjective interpretation of course.

[creativ_alertbox icon=”” colour=”blue” custom_colour=””]Need to speak to a professional about Inheritance Tax in Spain? Call us to arrange a free consultation with a Financial and Tax Specialist. (+34) 951 77 55 44 / (+44) 033 000 10 777[/creativ_alertbox]

Recent Change to Inheritance Tax in Andalucia

From the beginning of 2018 the threshold for Inheritance Tax in Andalucia has been set at 1m euros. This is a massive increase on the previous limit, and brings Andalucia in line with the other autonomous regions of Spain. This significant change, opens up estate planning opportunities for individuals who have up until now deliberately kept limited assets in Spain as part of their Inheritance Tax planning strategy.

Read more about this change in our article, Inheritance Tax Threshold Increase in Andalucia