/Featured Quiz4 October - Weekly Featured Quiz - General Knowledge

[fanciman]

For a UK citizen, living in Thailand (or, indeed, anywhere abroad) could you put money into an investment trust in the UK and then submit a tax form, indicating that you are not resident in the UK and therefor should not be taxed on your investment?

Is it really a simple matter, or much more complicated? Perhaps some trusts would refuse you?

[GuestHouse]

For a UK citizen, living in Thailand (or, indeed, anywhere abroad) could you put money into an investment trust in the UK and then submit a tax form, indicating that you are not resident in the UK and therefor should not be taxed on your investment?

Is it really a simple matter, or much more complicated? Perhaps some trusts would refuse you?

No you could not. But if you are still tax resident in the UK you can hold investment trusts within an ISA that would be tax free. You may also hold Tax Free National Savings Bonds.

Outside to those two methods your investments would be subject to capital gains or income tax, but you would still have tax free allowances that you could make use of.

[naka]

For a UK citizen, living in Thailand (or, indeed, anywhere abroad) could you put money into an investment trust in the UK and then submit a tax form, indicating that you are not resident in the UK and therefor should not be taxed on your investment?

Is it really a simple matter, or much more complicated? Perhaps some trusts would refuse you?

No you could not. But if you are still tax resident in the UK you can hold investment trusts within an ISA that would be tax free. You may also hold Tax Free National Savings Bonds.

Outside to those two methods your investments would be subject to capital gains or income tax, but you would still have tax free allowances that you could make use of.

You should read IR20.pdf

Naka.

[rgs2001uk]

this extract maybe what naka was referring to, i know my dividends are taxed at source, and paid to me net instead of gross.

9 Double taxation relief

9.1 If you have income or gains from a source in one country and are resident in another, you may be liable to pay tax in both countries under their tax laws. To avoid 'double taxation' in this situation, the UK has negotiated double taxation agreements with a large number of countries. A list of these is given at paragraph 9.16.

Non-residents, and residents of more than one country

9.2 If you are a resident of a country with which the UK has a double taxation agreement, you may be able to claim exemption or partial relief from UK tax on certain types of income from UK sources. You may also be able to claim exemption from capital gains tax on the disposal of assets. The precise conditions of exemption or relief can be found in the relevant agreement. It is not possible to give full details here as they vary from agreement to agreement. If you are resident both in the UK and a country with which the UK has a double taxation agreement, there may be special provisions in the agreement for treating you as a resident of only one of the countries for the purposes of the agreement.

9.3 Normally, you will receive some relief from UK tax on the following sources of income under an agreement

• pensions and some annuities (other than UK Government pensions)
  
• royalties
  
• dividends (paid before 6 April 1999)
  
• interest
  

Some agreements state that you must be subject to tax in the other country on the income in question before you get relief from UK tax.

9.4 If you receive a pension paid by the UK for service to the UK Government or to a local authority in the UK, you will usually be taxed only by the UK.

9.5 If you are carrying on a trade or running a business through a permanent establishment in the UK, you may not qualify for any relief from UK tax on royalties, interest or dividends connected with the permanent establishment. A Ôpermanent establishment' includes, for example, a place of management, a branch or an office.

Earnings from employment and professional services

9.6 Under many double taxation agreements you may be able to claim exemption from UK tax on

• earnings from an employment, and
  
• profits or earnings for independent, personal or professional services
  

carried on in the UK, if you are a resident of the overseas country for the purposes of the agreement (see paragraph 9.2). The usual conditions to be met are

• in the case of employments - you must not be in the UK for more than 183 days in the period (often, twelve months) specified in the agreement, and
  - your remuneration must be paid by (or on behalf of) an employer who is not resident in the UK, and it must not be borne by a UK branch of your employer
  
• in the case of independent, personal or professional services, you must not operate from a fixed base in the UK (or, in the case of some agreements, spend more than a specified number of days in the UK).
  

Teachers and researchers

9.7 Under some agreements, if you are a teacher or professor who comes to the UK to teach in a school, college, university or other educational establishment for a period of two years or less, you are exempt from UK tax on your earnings from the teaching post. Temporary absences from the UK during this period normally count as part of the two years.

Some agreements cover persons who engage in research. Where this is so, the rules are normally the same as for teachers.

9.8 If you stay for more than two years you cannot claim exemption and you will be liable to tax on the whole of your earnings from the date you arrived. Some agreements only allow exemptions to be given if the earnings are liable to tax in your home country. If you have already received exemption for a visit (or visits) of up to two years, some agreements will not allow you to claim the exemption again if you make a further visit at a later date.

Students and apprentices

9.9 Under most agreements, if you are an overseas student or apprentice visiting the UK solely for full-time education or training, you will not pay tax on payments from sources outside the UK for your maintenance, education or training.

A number of agreements also provide that students or apprentices visiting this country will be exempt from UK tax on certain earnings from employment here. Individual agreements impose various restrictions on this relief, including, for example, monetary limits and conditions as to the type of employment.

Entertainers and sportsmen/women

9.10 Under most agreements, if you are not resident in the UK and you come here as an entertainer or sportsman/woman, any payments you receive will be liable to UK tax. The exemption described in paragraph 9.6 will not apply. You should contact the Foreign Entertainers Unit (see paragraph 9 of the Introduction) for advice on how your income as an entertainer or sportsman/woman will be treated for tax purposes.

This includes, for example, actors and musicians performing on stage or screen and those participating in all kinds of sports.

Dividends

9.11 If you are resident in the UK, you are entitled to a tax credit when you receive a dividend from a company resident in the UK. We charge income tax on the total of the dividend and the tax credit. The tax credit is available to reduce your tax liability. The rate of the tax credit was reduced from 20% to 10% from 6 April 1999, reflecting the reduction in the rate of tax on dividend income from that date.

For dividends paid up to 5 April 1999, if all or any part of your dividend income is not taxable (for example, because you are a non-taxpayer), you may make a claim for the tax credit to be paid to you. However, payment of tax credits cannot be claimed in respect of dividends paid after 5 April 1999. (Tax credits will continue to be paid on dividends within an individual savings account or personal equity plan, up to 5 April 2004.)

Prior to 6 April 1999 companies with dividends paid wholly out of foreign source income could opt to have them treated as 'foreign income dividends' (FIDs). FIDs do not carry any tax credit, and are treated as paid to shareholders with notional income tax already deducted. This notional tax cannot be repaid to you.

9.12 If you are not resident in the UK, the normal rule is that you are not entitled to a tax credit when you receive a dividend from a UK company. From 6 April 1996 you do not pay UK tax (and before that date you would have paid UK tax, if at all, only at the higher rate) on any dividends.

You may, however, be entitled to a tax credit if you are a resident of a country with which the UK has a double taxation agreement, and the agreement provides for payment of the same tax credit as a UK resident would be entitled to receive. In that case, you are liable to income tax on the total of the dividend and tax credit, at the rate of tax laid down in the agreement. For periods up to 5 April 1999, you may claim payment of the tax credit in excess of the amount which the UK is entitled to retain.

From 6 April 1999, all double taxation agreements that provide for payment of a tax credit on dividends paid by UK companies continue to give that right. However, because the rate of tax credit has been reduced (see paragraph 9.11), the amount which the UK is entitled to retain under those agreements will in practice cover the whole of the tax credit. So if you make a claim under an agreement where a dividend has been paid on or after 6 April 1999, there will be no balance of tax credit left for us to pay to you.

9.13 You may also have the right to a tax credit if you receive UK tax allowances and reliefs through a claim in accordance with paragraph 7.3. But if you can only claim these allowances because of the terms of a double taxation agreement (the final category in paragraph 7.3), whether you are entitled to the tax credit will depend on the terms of the agreement.

Capital gains

9.14 Under many agreements, if you are a resident of another country for the purposes of the agreement, you will often be liable to tax only in the other country on any gains you make from disposing of assets. In that case, you will be exempt from capital gains tax in the UK even if you are ordinarily resident here. If, however, you are carrying on a trade or running a business through a permanent establishment in the UK, any gains you make from disposing of assets connected with the permanent establishment will continue to be chargeable to capital gains tax in the UK.

UK residents

9.15 If you are resident in the UK and have overseas income or gains which are taxable in both the UK and the country of origin, you may qualify for relief against UK tax for all or part of the overseas tax you have paid. Even if there is no double taxation agreement between the UK and the other country concerned, you may still be entitled to relief under special provisions in the UK's tax legislation.

[AFKAFSinLOS]

For a UK citizen, living in Thailand (or, indeed, anywhere abroad) could you put money into an investment trust in the UK and then submit a tax form, indicating that you are not resident in the UK and therefor should not be taxed on your investment?

Is it really a simple matter, or much more complicated? Perhaps some trusts would refuse you?

No you could not. But if you are still tax resident in the UK you can hold investment trusts within an ISA that would be tax free. You may also hold Tax Free National Savings Bonds.

Outside to those two methods your investments would be subject to capital gains or income tax, but you would still have tax free allowances that you could make use of.

Much more complicated than that Guesthouse.

rgs2001UK's post below is a good start on some of the additional factors. There are many more though...

Edited April 4, 2008 by AFKAFSinLOS

[hanibal7]

I am non resident and have excecutive bonds with royal skandia,asia, offshore thru an agency in bk.this is tax free and i draw when i need money.up to yet i havent had to draw any but i have the opportunity to open an offshore bank account too or transfer into my thai account.

[rgs2001uk]

I am non resident and have excecutive bonds with royal skandia,asia, offshore thru an agency in bk.this is tax free and i draw when i need money.up to yet i havent had to draw any but i have the opportunity to open an offshore bank account too or transfer into my thai account.

i dont know what executive bonds are, however the name royal skandia doesnt exactly have me rushing for my cheque book.

[PattayaParent]

For a UK citizen, living in Thailand (or, indeed, anywhere abroad) could you put money into an investment trust in the UK and then submit a tax form, indicating that you are not resident in the UK and therefor should not be taxed on your investment?

Is it really a simple matter, or much more complicated? Perhaps some trusts would refuse you?

No you could not. But if you are still tax resident in the UK you can hold investment trusts within an ISA that would be tax free. You may also hold Tax Free National Savings Bonds.

Outside to those two methods your investments would be subject to capital gains or income tax, but you would still have tax free allowances that you could make use of.

Maybe holding the Investment Trust offshore (CI or IOM) would avoid capital gains or income tax?

[hanibal7]

RGS

Up to you mate.