2007: Tax bonus for Spanish property buyers
By Sue Brown, 03 Jan 2007
There’s good news and bad news for British buyers of property in Spain amid predictions the ongoing “Silver Retirement” boom will see around 1.3 million people quitting the UK to live abroad
Bad news: The Sunday Times reported that a new ruling allows HM Revenue & Customs to change the way it calculates British residency based on how much time expats spend in the country. Under the new rules, expats may be taxed as a UK resident unless they can prove they have spent an average of no more than 90 days a year in Britain over four years to be deemed non-resident.
Before the ruling, the Revenue excluded the days that expats arrived and left and so allowed more time in the country. This was recently highlighted as a way that businessmen could spend more time in the UK without incurring tax penalties.
With predictions that around 1.3 million people will have retired abroad by 2025, according to Lombard Street Research, the report suggests that the UK Chancellor, Gordon Brown, may be targeting expats to plug a £3.5 billion gap in the budget.
The report quotes Mike Warburton, of accountancy firm Grant Thornton, who said people would “have to be much more careful when they calculate how many days they spend in the UK, and the onus is on them to prove to the taxman that they are not resident. My advice would be to keep your plane tickets and a diary from now on.”
Another accountant, Martin Rimmer of the Fry Group, added: “Saving UK tax by moving abroad is becoming much more difficult, and the taxman is likely to continue to pay greater attention to people wanting to adopt non-residence status.”
Good news: But there is still good news for Brits buying in Spain. The country is planning massive tax cuts for overseas property buyers. Terry Walker of leading online specialists, PropertyinSpain.Net said: “Spain is due to lower its ex-pat capital gains tax from 35% to 18% in January 2007 which will be 22% below the UK rate for second homes.
“Spain is also reducing withholding tax to 3% when an ex-pat sells their property. These extra tax breaks will ensure Spain remains the best all-round property investment. Using our Libertad tax break and co-ownership option is looking like the best way of buying a home in Spain.”
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