# Tricky situation with undeclared ISA....help please!



## LandFer (Oct 21, 2015)

Hi all
I'm new here and hope somebody can advise me on this...
In summary, I moved to Spain 8 years ago, leaving an ISA of around 30000 pounds in the UK as a long term saving I was planning on making use of in retirement.
Thinking I would only need to pay tax on any gains when I withdrew money, I didn't declare it for the first few years and was also advised that, unless the tax man really went digging, the Spanish would never be aware of it anyway.....( how times change!)

In 2012, after many years of financial struggle (same old story here!) I decided it was time to open my own business and had to withdraw around 15000 pounds from it to invest. 
Probably stupidly, I did not declare this amount at the time, but I was broke and rather miffed at the idea of paying tax on my "tax free" hard earned uk savings!
So now, I have the ISA still sitting there undeclared and it's worth around 34000 pounds now which WAS under the 50000 euro form 720 threshold but now we have this favorable exchange rate, it is creeping over, probably!
I have also now found out that I should have been paying tax on any interest earned each year for the past 8 years!
From 2016, I'm told there will be even greater transparency between countries and that the Spanish taxman will be likely to pick it up...... What do I do now?
Obviously, I've missed the amnesty and will be liable to fines. What is the best way to start declaring it without flagging up a tax investigation? Do I just put it in my 2016 declaration and pray it doesn't catch Señor tax inspector's avid attention or am I doomed to massive fines, etc, no matter what?
Thank you in advance for any help...sorry if it's a long story!


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## LandFer (Oct 21, 2015)

Nobody out there with tax financial savvy?


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## snikpoh (Nov 19, 2007)

There are plenty but I think your comment "What is the best way to start declaring it without flagging up a tax investigation? " has perhaps put them off.

I suspect you will just have to talk to an "assesor fiscal" and see what happens.

You either have a problem, or not - que sera, sera (as they say).


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## gus-lopez (Jan 4, 2010)

If the interest was "rolled over " & reinvested , i.e. you didn't actually take any then no tax would be payable.
The 15k when you took it should have tax paid on it but that's long gone at 8 years ago.
Assuming that you haven't been taking anything from it then at 34k pounds it has an approximate value of under 48k euros at the moment. I wouldn't worry & speak to your gestoria about declaring it " Now that the value is likely to go over the limit " 
It had no requirement to be declared before & still doesn't until it exceeds the 50k euro limit.
I'm assuming you use a gestoria as you mentioned starting a business.


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## Overandout (Nov 10, 2012)

gus-lopez said:


> The 15k when you took it should have tax paid on it but that's long gone at 8 years ago.


I'm not sure what the intention of this phrase was, but it now makes no difference how long in the past the avoidance took place.

At least according to my understanding of the new legislation (the one that allowed the modelo 720 to be introduced), the statute of limitations for prosecution of tax avoidance was scrapped and they can now go back as far as they like.

I agree about the need to declare the investment though. As long as it is the only investment of its type and is still under 50,000€, no need to declare its existence as an investement.

With regards to not having to declare the interest if it was re-invested in the ISA. I believe that only works if the OP was a tax resident in the UK. ISAs are tax free for residents only. If OP was a tax resident of Spain at the time, that would also be tax avoidance from the Spanish persepective.


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## Lynn R (Feb 21, 2014)

Overandout said:


> I'm not sure what the intention of this phrase was, but it now makes no difference how long in the past the avoidance took place.
> 
> At least according to my understanding of the new legislation (the one that allowed the modelo 720 to be introduced), the statute of limitations for prosecution of tax avoidance was scrapped and they can now go back as far as they like.
> 
> ...


I agree with your interpretation. I am not sure where Gus got the 8 years from anyway, because the OP stated that they withdrew the 15k in 2012.

He will need to keep a very close eye on the exchange rate as it does creep over the 50k mark as at 31 December 2015 then he will need to declare it.

Hacienda may then ask questions about why no interest has been declared on the investment in the past, and I don't think anybody on this forum or even a tax professional could give any assurances as to whether they will or they won't.


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## CapnBilly (Jun 7, 2011)

Overandout said:


> At least according to my understanding of the new legislation (the one that allowed the modelo 720 to be introduced), the statute of limitations for prosecution of tax avoidance was scrapped and they can now go back as far as they like.


Not sure I agree with this interpretation of how it applies to tax evasion generally. The statute of limitations still applies to tax evasion, e.g. Not declaring all your income. 

However, if you do not declare assets as required by the Modelo 720, and they are subsequently identified by the Hacienda, then there are changes to the law. If you cannot prove that they arise from declared income or income that arose when you were non-resident, then they will be considered as arising in the last tax year that is not statute barred, with all the consequences that arise as set out in the changes.


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## gus-lopez (Jan 4, 2010)

My apologies ,. For some reason I got 2007 from somewhere . :lol:


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## Chopera (Apr 22, 2013)

gus-lopez said:


> My apologies ,. For some reason I got 2007 from somewhere . :lol:


Because the OP wrote


> In summary, I moved to Spain 8 years ago, ...


 ? 

So in theory they should have been declaring any interest received, even if it was reinvested automatically, from when they arrived in Spain. I suspect the €15k withdrawn in 2011 might be a bit of a red-herring - it depends on the type of ISA I guess. If it's just cash then withdrawing from it shouldn't count as profit taking I'd have thought.

If it were me I'd make sure that investment is below €50k at the end of this year so I wouldn't need to worry about being investigated via he 720, even if that means withdrawing some cash from it, and then I'd start declaring the interest on it from next year on.


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## Overandout (Nov 10, 2012)

CapnBilly said:


> Not sure I agree with this interpretation of how it applies to tax evasion generally. The statute of limitations still applies to tax evasion, e.g. Not declaring all your income.
> 
> However, if you do not declare assets as required by the Modelo 720, and they are subsequently identified by the Hacienda, then there are changes to the law. If you cannot prove that they arise from declared income or income that arose when you were non-resident, then they will be considered as arising in the last tax year that is not statute barred, with all the consequences that arise as set out in the changes.


Thanks for a good explanation.

But as far as the investment itself is concerned, there is no problem with the effective derrogation of the limitation; it is under 50k and therefore does not, and has never needed reporting. 
If it goes over and needs to be reported then the OP should be able to prove that the investment was created while a UK tax resident before moving to Spain.

Wether or not the OP should have declared the gains / interest from the ISA depends on the amounts, personal circumstances, other incomes in the fiscal years etc... we cannot know if there is a liability there or not.


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## LandFer (Oct 21, 2015)

Thanks for all that input. It appears that the situation isn't entirely cut and dried! I'm going to see an international tax advisor and will let you all know what they say, thereafter my Spanish tax guy at my "Bufete" .... No idea how that translates! Lawyers, Gestoría and Accountants all in one building??
Have a sneaky suspicion I might be told two different things but let's see what they come up with....
Cheers


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