As the number of Britons taking up residence in Spain and France soared to a total of 961,000 by the end of 2006, the WAY Group reported a ‘significant’ rise in enquiries from expats concerned by highly complex taxation laws in both France and Spain, especially for Brits who are non-domiciled – i.e., living permanently in one of these countries.
“Up until quite recently we had little or no enquiries on the IHT abroad issue but IFAs are increasingly being asked to restructure clients’ affairs ahead of emigration to the sun. As a result WAY is being asked for comments on the IHT aspects of leaving the UK which is, of course, quite a grey area,” said WAY Group chairman Paul Wilcox.
A key fact which Britons retiring to live in France need to be aware of is that there is no exemption beyond the €76,000 personal allowance on transfers between husbands and wives on death – and, according to the Institute for Public Policy Research (IPPR), there are some 200,000 expat Britons that permanently reside in the country.
“Clearly, in the case of better-off expats, this relatively frugal allowance means that many Brits will be vulnerable – and if assets go directly to the children, each child only has a personal allowance of €50,000,” said Wilcox.
“Then tax from 5 up to 40 per cent will be levied – and many Brits are unaware of the fact that the kids actually have more rights than the spouse under French law.
“Unmarried Brits who live together are also very exposed – as the French will hammer you for 60 per cent.
“But the French tax authorities also have a system known as ‘assurances-vie’, which will allow unlimited amounts to be sheltered from punitive Gallic IHT laws – but it is crucial to set up an IHT mitigation plan before taking up residency.”
Spain, currently host to 761,000 full time resident Brits also has quirky death tax laws. Unlike the UK, assets in Spain do not pass automatically to spouses tax-free on the first death, and the surviving spouse can be vulnerable to Spanish inheritance tax.
“The tax-free allowance is just €15,957, and a further 34 per cent kicks in on amounts over €79,755 – but, in some circumstances, for example if they are not a blood relative, expats can be liable to pay 82 per cent under current Spanish law, unless they have made pre-domicile arrangements,” said Wilcox.
More and more expat Brits are also being caught out by UK IHT, which is payable on ‘worldwide’ assets when they die, depending on their domicile status.
“To change to a domicile of choice, a person needs to prove that they are a resident of that new country and that they intend to reside there permanently or for an unlimited time.
“Retaining residential property or even a burial plot within the UK can give the Revenue enough ammunition to challenge your domicile of choice abroad,” warned Wilcox.
“Pretty much regardless of where you are going, it is important to remove assets from one’s estate before leaving.
“But in doing so, it is vital to ensure that reliable trustees looking after those assets have the power to release funds as necessary back to the donors and, where required, to other named beneficiaries. Failing to do this is where so many expats fall down,” added Wilcox.
Story from mortgageintroducer.com
nothing to say.thankyou
Cassie, you are very welcome
I do wish someone could say, this is the thing to do to avoid this tax, there must be away to avoid this with out paying a fortune. There is a challenge for some clever person.
Inheritance tax was designed to redistribute wealth but while the increase in real estate values catch more and more families in the net, successive Governments have allowed the wealthiest segment of the population to benefit from a myriad of avoidance schemes and trusts. The effect is that as the richest families grow richer at each generation the rest of the population risks a lower standard of living as they might be forced to sell off family property to pay the tax. Europe is still a total mess as far as harmonization of taxes is concerned. The only common factor is that the rich can avoid paying their share. I believe that it is time for a totally revised tax system that allows the majority of the population to pass on assets ( that have already been taxed). to enable future generations to have a higher standard of living. I would propose abolishing all the complex avoidance schemes and donations etc and levy a simple flat rate of say 5% – or even 10% – of each person’s net assets at death(on second death of married couples)) with no exemptions, over and above a threshold of say 500000€. I am convinced this would be cheaper to administer, far more equitable and raise a great deal more revenue than at present in every European member state.
In the UK we have 2 sides argueing & forgetting that most of us have sweated blood & paid taxes all our lives in order to have a reasonable life and pass something on to our children & grandchildren…in fact just the ability for children to go to university and not end up with a load of debt should be sufficient reason to abolish IHT in it’s present form.
Because you work hard, & live sensibly…WHY should you be taxed just because you commit the crime of death!!! People can use their own money better than any government, and we have seen recently what greedy, corrupt & lazy lot our politicians are.
On Question Time the other evening Yvette Balls was going on
about the nasty conservatives & IHT, but failed to mention that at the time it suited them to match the conservatives with their own vote catching move.
Donate any spare cash to ANYTHING that will hit the politicians where it hurts………even O B L to bring back Guy Fawkes..