Uk Resident With Offshore Bank Account ?

[Khun Bob]

First read the story here :

http://www.citywire.co.uk/News/NewsArticle...&NewsPage=1

Then for the real thing see here :

https://disclosures.hmrc.gov.uk/oaics/

Many questions, but at the mo if you have an account which is not in the group they have information from ie :Barclays, HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland, whats the chances of tem finding out ?

Me thinks very little at the moment Their website it applies to any offshore account including channel islands, isle of man and all others where a loss of UK tax is involved. And this is for the past 20 years as well.

There is an amnesty for a while and you need to tell them that you intend to disclose and to pay up.

Also it seems that they will be exerting their force to get other information to. So if you make transfers to a overseas account, in your name, they may be interested in the future. Think it through - who knows where they will stop... But I guess it may be some time off as I believe all they have at the moment is a list of people who have or have had accounts in the banks mentioned above. I don't believe they have information on amounts or transactions - but I may be wrong....

From the citywire article "While investors that come forward will still have to pay any outstanding tax and interest on offshore assets held over the last 20 years, the penalty for non-disclosure will be capped at 10% of the tax balance down from a maximum of 100%."

Scary stuff eh ? UK's getting more like USA all the time. Cheap Panamanian passports and citizenship anyone ?

Please discuss any ideas/strategies on how to manage this... Compliance is of course one, but I wasnt really thinking of that option...

Edited April 20, 2007 by Khun Bob

[issanpaul]

[britmaveric]

Well if you are making dosh from investments in the UK then well the tax is well deserved and should have been paid. However other than that I really see no large concern.

[JimsKnight]

The meddling Scot, Gordon Brown strikes again!

Actions like this may cost him dear, the expat vote (if you register) is credited with the 1994 re-election, lets see what it may do this time around....

[Penkoprod]

Isnt the keyword here.............. "resident" though?

Penkoprod

[Khun Bob]

I think the key words are resident and domiciled - I'd hazard a guess that there are quite a few brits living in thailand for some/most of the year who have offshore investments amd are resident and domiciled as far as HMRC are concerned - plus their radar want to go back 20 years - so another of the many questions is if you are now non resident, yet have been resident over the past 20 years and had an offshore investment which received interest/profit/gain over the past 20 years, will they come looking for you ? Will they get you when you go back to the UK.

I dont know what information they have got and this may be just the beginning as there is alot of brits leaving the UK and the government want a piece of their action.

Even tonight I had a look at some offshore accounts and anglo irish are not not accepting applications from UK resident and domiciled individuals - and they dont have a head office in the UK - they are based in Dublin, but do have a UK based subsidiary. As far as I understand it is organisations that have a head office in the UK they have leant on so far for info. Many people hear use HSBC - well I'd reconsider that now. But if your non-resident and not likely to be or want to be then still best to be on the safe side and keep your money out of organisations that have a substantial representation in the UK. Who knows what the future holds. Also if you are not normally resident some of the things resident folks "enjoy" are no longer there e.g. the level of care on the NHS is limited (may be better to use one of those Europe health cards and go for a "holiday" in Poland - yes even the Poles comment on how poor health care is in the UK - still I dont know if this would work). I guess the government is looking up to the biggest brother, USA, and seeing what is working for them - heaven forbid if HMRC get powers like the IRS over US citizens !

[cmsally]

Strange in that literature how little the word resident or non resident is used.

There seems to be virtually no separation.

Domicile is a tricky one and I doubt that anyone with British parents /background could prove they were not a British domicile.

Certainly dealing with the In Rev they would twist it around so you were.

The only thing I can think of as a non resident is that for tax office and banks your address is outside of the UK so they would have fun prosecuting you out there in Nakhon Nowhere. But always helps to keep a jump ahead so I will be moving away from the 4 major banks mentioned.

I'm afraid that I am very cynical and my point of view is that the banks could have cut a deal with the government.

For non residents see here:

Offshore bank accounts

This does in fact say that you don't have to pay tax on interest if non res.

It seems their target is people who live in UK and have offshore acct, return and maintain their accts, and poor old ebay traders!

Another one here that says it is only residents who will be charged tax, but look at the language it is very foggy and the banks excuse for handing over details is not an excuse at all, just a bit of verbal gymnastics.

Offshore accounts and tax

[expatgaz]

The solution to all of these problems are simple.When you have an "offshore" account you need to prove to the Bank you are a "Non Resident" of the UK. If you do this you are not liable to UK Taxes.If you don't do this,then you are liable.

Simple really.Being classed as non resident does not effect you,or lose any rights etc.

[Khonwan]

What a lot of nonsense has been spoken by a few on this topic.

Most British expats living abroad have absolutely nothing to fear. There has been, and will be, no change to the way the UK treats earned or investment income.

The only Brits here that should fear the current crackdown (notice, I said crackdown - it's not a new law) are those who do not want the UK to know they are non-UK-resident. Who might that be? Women over 60 and men over 65 who are currently in receipt of index-linked state pensions. And why don't they want the UK to know they are not non-UK-resident (ie why do they want the UK government to believe they are still resident in the UK?)? Because their state pension will no longer benefit from index-linked rises - the rate will be frozen (ie their pension payments will never rise whilst they remain non resident in UK).

Who else should fear the crackdown? UK-residents (people who LIVE in the UK) who are hiding their undeclared earnings overseas in bank accounts (earning untaxed interest), etc., and who have therefore been breaking the very old and still current law.

Forget domicility (I could go into this but it would only confuse those all too willing to be confused) - it doesn't matter in this regard.

I could make this real complicated, and start to talk about number of days, etc., but I won't. I closed the door to my past life in financial services quite some time ago and have no interest in reviving it. I just can't ignore the drivel I'm reading here though.

[Naam]

The solution to all of these problems are simple.When you have an "offshore" account you need to prove to the Bank you are a "Non Resident" of the UK. If you do this you are not liable to UK Taxes. If you don't do this, then you are liable.

not apllicable as far as banks located outside the UK AND European Union are concerned. no bank in Hong Kong, Singapore, Cayman Islands and a bunch of other well known offshore centers asks a client to prove anything for tax reasons. banks however demand proof of residence (e.g. by submitting a utility bill) based on the international drive to fight terrorism and money laundering. all under the umbrella "know your client".

if a UK subject -residing in the UK- opens an account with the afore-mentioned banks he/she is of course liable to pay UK taxes. BUT it is up to him/her to pay or not Her Majesty's taxman. the banks couldn't care less.

Edited April 21, 2007 by Dr. Naam

[sonicdragon]

The UK government is taking steps to reduce tax evasion. That is all. There is no change in the law. If you are resident and ordinarily resident in the UK then you had better not hide your income from the government. If you don't hide it you have nothing to lose. This has always been the case.

[RHCP]

I have been registered Non-Resident with the Inland Revenue for the past 8 years. I have had an offshore investment in a currency fund (not bank account) for almost 10 years. I am unclear whether the rolled up interest (not paid out income) in the fund would make me liable for UK tax during the initial 2 years when as a UK resident. I have been told that as I have been Non-Resident for over a 6 year period then I would be exempt anyway.

Any tax experts out there with an opinion on this?

[technocracy]

I have been registered Non-Resident with the Inland Revenue for the past 8 years. I have had an offshore investment in a currency fund (not bank account) for almost 10 years. I am unclear whether the rolled up interest (not paid out income) in the fund would make me liable for UK tax during the initial 2 years when as a UK resident. I have been told that as I have been Non-Resident for over a 6 year period then I would be exempt anyway.

Any tax experts out there with an opinion on this?

Listen to Khonwan - you've got nothing to fear, if your non-resident and completed your P85 there is nothing what the IR can come looking for since you are outside of their juristriction. You need be paying tax to which ever country you are resident.

Basically folks think that using an off-shore account makes them exempt from the UK IR tax. If the money goes into an off-shore account but the money is then spent in the UK then you should be paying taxes. If you live in the UK and are making money of an off-shore account then you should be paying tax on it - regardless of where the account is held.

[briley]

Isn't this linked to the EU withholding tax?

Offshore banks, including many outside the EU, have to notify your tax authorities of your account. If they don't they must make a withholding tax that is going to rise to 40%.

The withholding tax is chargable if you don't confirm you have declared your income to your tax authorities.

Countries were force to adopt these rules by the EU about 10 years ago under threats - forget exactly what but involved preventing them acting as banks and having access to financial services in London etc.

RHCP - as far as I know rolled up interest is only taxable when paid out. Normally the funds roll up the interest and pay it out as growth at the end of the time period or when you cash in the bond/fund or whatever. The point of this is to convert income (interest) into capital gain (growth) that then enables you to use your capital gains tax allowance. Tax is only payable when the growth is realised. From all this, no you do not owe tax from the 1st 2 years if it was not paid but rolled up. As you have been non-resident for over 5 years you are now excempt from capital gains tax. But this is only my opinion!

[Khun Bob]

Seems that most people that have responded are now non-resident. Any people who are resident and have offshore "interests" care to comment on stragegies for avoidance/damage limitation now and in the future...

[Naam]

Offshore banks, including many outside the EU, have to notify your tax authorities of your account. If they don't they must make a withholding tax that is going to rise to 40%.

please don't spread rubbish!

[Khun Bob]

Some criticism in this thread - but if some one is wrong could you back it up with what you beleive to be correct - ie state the facts for discussion... ( or give a referral to a respected source...)

[Naam]

Some criticism in this thread - but if some one is wrong could you back it up with what you beleive to be correct - ie state the facts for discussion... ( or give a referral to a respected source...)

it is absolutely nonsense to claim that offshore banks outside the European Union are required or will on their own inform any tax authority. that too goes for banks located in countries which have ratified the EU withholding tax agreement.

the EU resident client -banking in the EU or Switzerland- has the option either withholding tax is deducted from his/her interest income or allow his bank to inform the relevant authorities. withholding tax however is not deducted when realizing capital gains.

furthermore no withholding tax (even for interest income) is applied if beneficiaries, residing in the EU establish a corporation and hold their assets in a corporate account.

to sum it up: a UK resident banking outside the EU has no problems assuming that the british taxman has no information. banks will not disclose any information or deduct any withholding tax. it is up to him/her to pay taxes or spend the money for nicer things.

Edited April 22, 2007 by Dr. Naam

[LivinLOS]

Simple answer if your concerned shift to the Caribbean Gib or elsewhere.. My offshore bankers put in writing that I am not a UK resident (nor ever have been since banking with them for a decade) on my personal accounts but keep real assets in a blind trust anyway.

[sonicdragon]

Seems that most people that have responded are now non-resident. Any people who are resident and have offshore "interests" care to comment on stragegies for avoidance/damage limitation now and in the future...

I would recommend checking this forum and posting a question if you don't find the answer in an existing thread

http://www.taxationweb.co.uk/forum/

And you would probably be well advised to engage the services of a tax advisor.

[briley]

Dr. Naan,

Aren't we more or less in agreement?

You said "the EU resident client -banking in the EU or Switzerland- has the option either withholding tax is deducted from his/her interest income or allow his bank to inform the relevant authorities. withholding tax however is not deducted when realising capital gains."

I agree with all of this but remember that in the mid 1990's the EU negotiated with most of the offshore sites, including Cayman Islands, Gib, Malta etc, and put pressure on them to come to the same agreement as Switzerland. In the late 1990's I had communications from banks in the Channel Islands asking about residence and saying the relevant tax authority would be notified or a withholding tax imposed.

Although I can't quote the proposed top rate of withholding tax I recall that it was well above the UK standard tax rate.

I've never said withholding tax is charged on capital gains.

[scottishjohn]

I have just received the following from my BOS Isle of Man. “HM Revenue & Customs (HMRC) have served notice on (the bank) under section 20(8A) of the taxes management act 1970 etc. Although confidentiality is of utmost importance to us, the notice means we are legally obliged to provide HMRC with certain information about the account(s) listed above. We have no choice but to provide this information. This includes your name, UK address, date of birth, balance and annual interest from 5 April 2001 to 5^th April 2005.

HMRC have announced an offshore voluntary disclosure initiative. Etc……”

(please note the dates above. My account was opened well before 5 April 2001 and I am “resident abroad for tax purposes”. I hope the following may help. https://disclosures.hmrc.gov.uk/oaics/InteractionMgr?interactionmgr.interaction=MN_01&action=goto&destination=FQ_01

Example FAQ

I am considering whether to make a disclosure. Is my domicile status relevant?

It may be. Your domicile can affect your liability to pay UK tax on overseas income or and gains. If you are UK resident but not domiciled here, the only offshore income and gains you usually pay UK tax on is the amount that you bring or transfer to the UK. So, if you have not brought or transferred any income or gains into the UK, you may not have any additional UK tax liabilities to disclose.

However, even if you are not domiciled in the UK, you will need to consider making a disclosure if:

• you have any undeclared income arising in the Republic of Ireland, whether or not you have brought or transferred it into the UK (because different arrangements apply for the Republic of Ireland)
  
• you have brought or transferred income or gains from overseas into the UK without declaring it and paying the appropriate tax
  
• the offshore account includes deposits of income or gains that arose in the UK that you have not previously declared to us.
  

From

[Naam]

Aren't we more or less in agreement?

we are in agreement except for the general statement "Offshore banks, including many outside the EU, have to notify your tax authorities of your account. If they don't they must make a withholding tax that is going to rise to 40%."

besides the offshore centers you mentioned a number of others exist which have not signed (and have no intention to sign) the EU tax agreement.

on top of that dozens of countries exist (not necessarily "offshore centers") where anybody can bank and at the same be sure that no information will be disclosed to Her Majesty's taxman.

i don't want to propagate tax invasion for british citizens but the easiest way is to provide some sort of documentation to most european banks (preferably Luxembourg, Austria or Switzerland) that the residence is outside the EU. banks are quite stubborn but in many cases they are quite happy to comply with the client's demand as long as their butts are covered.

[Naam]

withholding tax rates and periods:

15% 01.07.2005 > 30.06.2008

20% 01.07.2008 > 30.06.2011

35% 01.07.2011 onwards

[torito]

By using offshore account contractors can get real benefits as they can declare only partial income for tax purpose (if they need it) and maintain the bulk of their porfits offshore. This use to be the benefit of multinationals but now this benefit can be obtained by independent professionals who work out of their countries of residence.

In spite that the tax man is asking offshore account details (to some banks), one can always distribute the money to different banks around the world.

I use a HK based offshore company and I have paid very little tax since then. I have worked in Australia and Europe, but I have never existed as an individual as the money goes to the company and this send to me the money where I want. In the worse case you pay tax for partial income which can be a big saving.

If you are a contractor or independent business person you may be able to keep saving some tax.

Edited April 22, 2007 by torito

[Arkady]

What a lot of nonsense has been spoken by a few on this topic.

Most British expats living abroad have absolutely nothing to fear. There has been, and will be, no change to the way the UK treats earned or investment income.

The only Brits here that should fear the current crackdown (notice, I said crackdown - it's not a new law) are those who do not want the UK to know they are non-UK-resident. Who might that be? Women over 60 and men over 65 who are currently in receipt of index-linked state pensions. And why don't they want the UK to know they are not non-UK-resident (ie why do they want the UK government to believe they are still resident in the UK?)? Because their state pension will no longer benefit from index-linked rises - the rate will be frozen (ie their pension payments will never rise whilst they remain non resident in UK).

Who else should fear the crackdown? UK-residents (people who LIVE in the UK) who are hiding their undeclared earnings overseas in bank accounts (earning untaxed interest), etc., and who have therefore been breaking the very old and still current law.

Forget domicility (I could go into this but it would only confuse those all too willing to be confused) - it doesn't matter in this regard.

I could make this real complicated, and start to talk about number of days, etc., but I won't. I closed the door to my past life in financial services quite some time ago and have no interest in reviving it. I just can't ignore the drivel I'm reading here though.

I wonder if this would apply to branches of those banks in HK and Singapore which have bank secrecy laws or if they are only going after Channel Islands and Isle of Man, which they have been trying to get at for a long time, at this point. For those abroad who might go back to the UK (or get divorced) and want to keep a tax free nest egg, consider accounts in the name of offshore companies and trusts. Switzerland already deducts some tax in a block from EU residents without disclosing their identity. Singapore is aggressively going after after EU accounts that want to bail out of Switzerland and won't co-operate with the EU tax authorities but it would best to avoid branches of UK banks there and in HK. Domicile is only relevant for inheritance tax for Brits and in the cases where a foreigner is living in the UK but domiciled elsewhere.

[torito]

What a lot of nonsense has been spoken by a few on this topic.

Most British expats living abroad have absolutely nothing to fear. There has been, and will be, no change to the way the UK treats earned or investment income.

The only Brits here that should fear the current crackdown (notice, I said crackdown - it's not a new law) are those who do not want the UK to know they are non-UK-resident. Who might that be? Women over 60 and men over 65 who are currently in receipt of index-linked state pensions. And why don't they want the UK to know they are not non-UK-resident (ie why do they want the UK government to believe they are still resident in the UK?)? Because their state pension will no longer benefit from index-linked rises - the rate will be frozen (ie their pension payments will never rise whilst they remain non resident in UK).

Who else should fear the crackdown? UK-residents (people who LIVE in the UK) who are hiding their undeclared earnings overseas in bank accounts (earning untaxed interest), etc., and who have therefore been breaking the very old and still current law.

Forget domicility (I could go into this but it would only confuse those all too willing to be confused) - it doesn't matter in this regard.

I could make this real complicated, and start to talk about number of days, etc., but I won't. I closed the door to my past life in financial services quite some time ago and have no interest in reviving it. I just can't ignore the drivel I'm reading here though.

'Khonwan' is quite right in many aspects. What the tax department is looking for is big fish, as usual. Almost everybody has a small tax sin, an small somethinbg forgotten, an inexistent expense.....the tax department have no time and resources to go for "all" taxpayers evading tax.......

[briley]

Might be interesting to get a list of countries outside the EU cooperating with EU tax authorities.

This thread has listed Switzerland, IOM, Channel Island as cooperating - but none, except maybe Singapore, not cooperating

AS a digression if you are non resident you can get your interest in the UK paid tax free, or recover it, up to the personal allowance. That is assuming you don't have any other UK income. And as UK banks tend to pay higher interest rates and lower charges than 'offshore' accounts it is better to invest in the UK than outside.

[scottishjohn]

What a lot of nonsense has been spoken by a few on this topic.

Most British expats living abroad have absolutely nothing to fear. There has been, and will be, no change to the way the UK treats earned or investment income.

The only Brits here that should fear the current crackdown (notice, I said crackdown - it's not a new law) are those who do not want the UK to know they are non-UK-resident. Who might that be? Women over 60 and men over 65 who are currently in receipt of index-linked state pensions. And why don't they want the UK to know they are not non-UK-resident (ie why do they want the UK government to believe they are still resident in the UK?)? Because their state pension will no longer benefit from index-linked rises - the rate will be frozen (ie their pension payments will never rise whilst they remain non resident in UK).

Who else should fear the crackdown? UK-residents (people who LIVE in the UK) who are hiding their undeclared earnings overseas in bank accounts (earning untaxed interest), etc., and who have therefore been breaking the very old and still current law.

Forget domicility (I could go into this but it would only confuse those all too willing to be confused) - it doesn't matter in this regard.

I could make this real complicated, and start to talk about number of days, etc., but I won't. I closed the door to my past life in financial services quite some time ago and have no interest in reviving it. I just can't ignore the drivel I'm reading here though.

'Khonwan' is quite right in many aspects. What the tax department is looking for is big fish, as usual. Almost everybody has a small tax sin, an small somethinbg forgotten, an inexistent expense.....the tax department have no time and resources to go for "all" taxpayers evading tax.......

This has nothing to do with "BIG FISH" please see my earlier entry and go to the link. ALL UK offshore banks MUST report ALL UK address to HMRC.

[LivinLOS]

What a lot of nonsense has been spoken by a few on this topic.

Most British expats living abroad have absolutely nothing to fear. There has been, and will be, no change to the way the UK treats earned or investment income.

The only Brits here that should fear the current crackdown (notice, I said crackdown - it's not a new law) are those who do not want the UK to know they are non-UK-resident. Who might that be? Women over 60 and men over 65 who are currently in receipt of index-linked state pensions. And why don't they want the UK to know they are not non-UK-resident (ie why do they want the UK government to believe they are still resident in the UK?)? Because their state pension will no longer benefit from index-linked rises - the rate will be frozen (ie their pension payments will never rise whilst they remain non resident in UK).

Who else should fear the crackdown? UK-residents (people who LIVE in the UK) who are hiding their undeclared earnings overseas in bank accounts (earning untaxed interest), etc., and who have therefore been breaking the very old and still current law.

Forget domicility (I could go into this but it would only confuse those all too willing to be confused) - it doesn't matter in this regard.

I could make this real complicated, and start to talk about number of days, etc., but I won't. I closed the door to my past life in financial services quite some time ago and have no interest in reviving it. I just can't ignore the drivel I'm reading here though.

'Khonwan' is quite right in many aspects. What the tax department is looking for is big fish, as usual. Almost everybody has a small tax sin, an small somethinbg forgotten, an inexistent expense.....the tax department have no time and resources to go for "all" taxpayers evading tax.......

This has nothing to do with "BIG FISH" please see my earlier entry and go to the link. ALL UK offshore banks MUST report ALL UK address to HMRC.

NOT if you are not or have not been (during the life of the account) an EU resident.. This is writing from my bank and OCRA worldwide..

If your worried set up a blind trust with non disclosure of beneficial owners.. Not very expensive and far mroe secure.