# Tax on interest and dividends.



## Just-so (Mar 1, 2012)

Please bear with me on this.
My Spanish bank gives me money every time they pay a direct debit from my account.
They take some of the money due to me as tax.
On my Spanish return I declare the money they give me and the tax they withhold.
The Spanish tax office then refunds to me the tax the bank withheld.

Because ?

I am not liable for tax in Spain because my income is below the personal allowance level.

Question. If I tell the Spanish tax office the (tiny) amount of interest I earn in the UK and the (even more tiny) amount of tax I pay on it in the UK will I get a refund from the Spanish tax office of the interest paid in the UK to UK tax office.
Or does it only "Work" because the interest I get refunded is taken at source by a Spanish bank. Is that the key factor ?
Or do I claim a refund from the UK tax office because they are taking tax off me and I am a Spanish tax payer so how dare they!! Give me my money back!!!
OR do I write to the firm that pays me a tiny amount of interest and tell them to stop deducting tax 'cos I'm a foreigner now for tax purposes.

Any comments really welcome. thank you.


----------



## Stravinsky (Aug 12, 2007)

Just-so said:


> Please bear with me on this.
> My Spanish bank gives me money every time they pay a direct debit from my account.
> They take some of the money due to me as tax.
> On my Spanish return I declare the money they give me and the tax they withhold.
> ...


The simple answer to the question is that as a Spanish tax resident you should be paying tax in Spain on the income that you have in the UK. Therefore you should be declaring that income on your tax return in Spain, and you should have "zero rated" yourself in the UK for tax.

Due to the apparently small amounts you are talking of, I doubt it is worth the hassle for the tax you paid, but suffice it to say there is a dual tax treaty so you shouldnt normally end up paying tax in both countries.


----------



## snikpoh (Nov 19, 2007)

Stravinsky said:


> The simple answer to the question is that as a Spanish tax resident you should be paying tax in Spain on the income that you have in the UK. Therefore you should be declaring that income on your tax return in Spain, and you should have "zero rated" yourself in the UK for tax.
> 
> Due to the apparently small amounts you are talking of, I doubt it is worth the hassle for the tax you paid, but suffice it to say there is a dual tax treaty so you shouldnt normally end up paying tax in both countries.


I am declaring the interest gained in UK on my Spanish tax forms but I can NOT seem to be 'zero rated' in UK - consequently I pay tax in both countries.


I filled in the R85 form in UK and Santander have confirmed that the accounts are marked 'gross interest'. However, HMRC then promptly tell Santander to deduct tax (apparently). I have argued with both HMRC and Santander but to no avail.

I have just filled in forms (R43) in UK to try and get the tax back.



What else can I do? We are talking about a few thousand pounds every year!


----------



## CapnBilly (Jun 7, 2011)

snikpoh said:


> I am declaring the interest gained in UK on my Spanish tax forms but I can NOT seem to be 'zero rated' in UK - consequently I pay tax in both countries.
> 
> I filled in the R85 form in UK and Santander have confirmed that the accounts are marked 'gross interest'. However, HMRC then promptly tell Santander to deduct tax (apparently). I have argued with both HMRC and Santander but to no avail.
> 
> I have just filled in forms (R43) in UK to try and get the tax back.


They should pay you back as under the double taxation agreement, you should not pay taxa twice on the same income. 

You need to complete a form R105, to claim for interest to be paid gross as a non resident. R85 is only for UK residents. You claim back the tax deducted on a R43, as you have done, but I don't think they will then use that to authorise the interest gross. They love forms at HMRC.


----------



## Stravinsky (Aug 12, 2007)

snikpoh said:


> I am declaring the interest gained in UK on my Spanish tax forms but I can NOT seem to be 'zero rated' in UK - consequently I pay tax in both countries.
> 
> 
> I filled in the R85 form in UK and Santander have confirmed that the accounts are marked 'gross interest'. However, HMRC then promptly tell Santander to deduct tax (apparently). I have argued with both HMRC and Santander but to no avail.
> ...


You have to fill in the forms HERE in Spain In english and Spanish). You take them to the hacienda and they authorise them and (iirc) send you a document which you then submit to the tax authorities in Spain. They then issue you a letter confirming that you are no longer subject to taxation in the UK. It took about 6 weeks for us and we sent everything to HMRC Nottingham, but I believe it is now all handled by Ty Glas Road in Cardiff

http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=MDBA5kV0DXk&formid=982


----------



## CapnBilly (Jun 7, 2011)

Stravinsky said:


> You have to fill in the forms HERE in Spain In english and Spanish). You take them to the hacienda and they authorise them and (iirc) send you a document which you then submit to the tax authorities in Spain. They then issue you a letter confirming that you are no longer subject to taxation in the UK. It took about 6 weeks for us and we sent everything to HMRC Nottingham, but I believe it is now all handled by Ty Glas Road in Cardiff
> 
> Form Spain/Individual - Application for relief at source from UK Income Tax/Claim to repayment of UK Income Tax


Assuming you mean the Form-Spain Individual (formerly know as FD9, and before that something else), then this form specifically says that HMRC cannot arrange for interest to be paid gross. To be paid gross you have to complete an R105, and submit it to the deposit taker (assuming they operate a gross payment scheme for non-residents), who will then pay you gross. The UK resident form is the R85. Presumably this is why Santander tell the OP that their records show gross interest (with an R85), but when they submit the records to HMRC they tell them to charge tax, because their records show the OP is non-resident. This shows they check the records.

In addition,( and I'm not sure if this is a change to the form, because I don't remember it, but I haven't got a copy of the old form, so I can't be sure), they will only refund tax paid on interest over 12% - under Article 11 of the Double Taxation Agreement - using this form. To be able to get the additional 12 % back, you have to claim an tax allowance using R43, and claim it back that way.


----------



## Stravinsky (Aug 12, 2007)

CapnBilly said:


> Assuming you mean the Form-Spain Individual (formerly know as FD9, and before that something else), then this form specifically says that HMRC cannot arrange for interest to be paid gross. To be paid gross you have to complete an R105, and submit it to the deposit taker (assuming they operate a gross payment scheme for non-residents), who will then pay you gross. The UK resident form is the R85. Presumably this is why Santander tell the OP that their records show gross interest (with an R85), but when they submit the records to HMRC they tell them to charge tax, because their records show the OP is non-resident. This shows they check the records.
> 
> In addition,( and I'm not sure if this is a change to the form, because I don't remember it, but I haven't got a copy of the old form, so I can't be sure), they will only refund tax paid on interest over 12% - under Article 11 of the Double Taxation Agreement - using this form. To be able to get the additional 12 % back, you have to claim an tax allowance using R43, and claim it back that way.


Well, all I can tell you is that it is the correct way to do it. I know, because I have done it and so have several of my neighbours. The result is that you are no longer taxed in the UK, and you simply declare on your Spanish tax form. We have never completed any other forms, not saying it isnt correct, but thats the ways it is.

The only difference for us is that one of the pensions is Government, and therefore it stays taxed in the UK

The interest you get on UK bank accounts these days, and probably for a long time to come, is so insignificant though sometiimes, wonder if its worth the bother


----------



## CapnBilly (Jun 7, 2011)

Stravinsky said:


> Well, all I can tell you is that it is the correct way to do it. I know, because I have done it and so have several of my neighbours. The result is that you are no longer taxed in the UK, and you simply declare on your Spanish tax form. We have never completed any other forms, not saying it isnt correct, but thats the ways it is.
> 
> The only difference for us is that one of the pensions is Government, and therefore it stays taxed in the UK
> 
> The interest you get on UK bank accounts these days, and probably for a long time to come, is so insignificant though sometiimes, wonder if its worth the bother


It is the correct form to have pension and other types of income paid gross and refunded, but not interest income, which is what both posts were asking about. So unless the posters complete a R105, tax will be deducted, and only refunded over 12%, unless they complete R43.


----------

