Returning to England

We are currently tax residents in Spain and have sold our house and completing at the Notary in a couple of weeks.We have the certificate from the tax office so that the 3% wont be deducted.
We now think that we are going to return to England and have seen on a previous thread that as long as all the profit from the house in Spain is re-invested in our only new house in England,then there will be no CGT to pay.
Can you just answer me a couple of questions.
1. If we move back to England in September, would we become tax residents in UK from then or in January 2011,being the new tax year in Spain.
2. If we rent for a while in England,and then buy in the next tax year i.e.June 2011,the accounts that we would have done for the period Jan 2010-Dec 2010 would only show the sale of the property.
Do we have to then have accounts done in Spain (even though we will be tax residents in England by then) to show that we have re-invested all the CGT on buying a house in England in tax period Jan 2011-Dec 2011.
Hope you understand this!!

Dear Maureen

In Spain once you are fiscal resident you are so on the following 4 years after leaving the country.

This reform was brought about as a result of elite Spanish tennis players re-domiciling in tax havens, such as Monaco, for tax avoidance purposes. This 4-year rule means their income will still be taxed in Spain on the following 4 years after having left the country.

So returning to your query despite you becoming domiciled in the UK for tax purposes you are still fiscal resident in Spain for the following 4 years.

As you correctly write, you can re-invest the sales proceeds of you main residence in Spain buying a property in the UK within the next two years of having sold up. These re-invested funds will be tax exempt from the Spanish side. You ought to check if they are also tax exempt by the HMRC.

You will be spoilt for choice on similar queries on this matter in our Taxes subforum.

I.e.

Capital gains exemption when selling Spanish property ( 1 2)
Christine

Yours sincerely
Raymundo LarraÃ*n Nesbitt

Dont quite understand about being tax residents for the next 4 years.We have no income from Spain,I only declare my State pension from the UK and we are not liable for tax,we have only been doing this to keep the paperwork in order.
I have been told by the tax authorities in England that on return I will become a Bitish taxpayer again.We do not want to continue to have tax returns done when we no longer live in Spain,have no earnings from Spain or own property in Spain.
It seems that it would be easier to pay 3% witholding tax at the time of the sale.
Hope you can advise me further
Maureen

Dear Maureen

The 3% wittheld is not a tax. It is a retention on account of your CGT which may be nil or positive. Depending on the outcome there are different scenarios:

1. If it is nil you can claim back the 3% wich on average takes between 15-18 months to be refunded (plus interests) by the Tax office. I advise retaining a lawyer to do this on your behalf.

2. If CGT is positive you will have to pay tax to the Spanish Tax office of which they already have a 3% withheld as a "security" (should you run away from the country). If you owe them more than that they keep the 3% and will request the difference from you. If your tax bill is less they will refund the difference providing you claim it from them.

If it is positive and you've sold your main residence you have a roll-over relief for the amount of the sales proceeds on re-investing in another main residence, even if its in the UK.

I hope the above clarifies the issue.

Yours sincerely
Raymundo LarraÃ*n Nesbitt

Sorry to bother you again,but am I correct in saying that I will declare my State Pension in England,so there will be nothing to declare in Spain until we have bought a property in England.Obviously we will have done a Spanish return for 2010 next June showing the sale of the property,but there will be nothing else to declare then until we have used the CGT on buying another house in England.
Maureen

No, you are not correct Maureen.

As written and explained in my first post you are tax liable for the following 4 years after leaving Spain. A pension pays taxes here in Spain despite you now being tax domiciled in the UK. They are not incompatible.

With the Double Taxation Treaty you can offset what you've already paid to the HMRC against the Spanish tax liability. Normally this means that nothing more has to be paid in Spain on your pension but for a different reason that what you think.- you've already paid taxes for it in England. They are not going to make you pay twice for it following the DTT.

Regards