Offshore Trusts for Investments....

[*JDR*]

Does anyone know anything about setting up or using an offshore trust for investing/trading?

 

[Directional]

only worth doing if you have a lot of cash and/or very profitable investment.

Its quite expensive to set something up properly (five figures), and expensive to maintain as well so you have to weigh the costs against the tax savings. An economy of scale.

You can do it on the cheap with some of the stuff you see come up on a google search, but if its not done properly and legally, you'll still be liable for tax if the Revenue determine you're operating a "scheme" and you'll have to pay tax anyway, plus stand the probability of being punished.

 

[roguetrader]

It's interesting the idea of doing something "offshore" or moving something offshore seems to crop up every so often. I presume it is in an effort to thwart the tax man. I think the most suitable thing to move offshore if this is the case is probably oneself.

 

[Directional]

too right - one could move to dubai and pay zilch in tax for the cost of a flight and a work permit

 

[*JDR*]

Been doing some research and discovered any returns I get outside of the UK are not liable for tax anyhow, unless remitted to the UK.

Must check with the tax man but I believe my status is:
Resident, NOT ordinarily resident, NOT domiciled.

Thanks for your replies.

 

[Jack o'Clubs]

Been doing some research and discovered any returns I get outside of the UK are not liable for tax anyhow, unless remitted to the UK..

Get booklet IR20 from HMRC (either pdf online or order in print). That will tell you what you need to know about your residency and domicile status. You're likely to find that even if you're not ordinarily resident, you're still liable to tax as your trading is carried out from the UK, even if you offshore it, because it's all about where you 'perform your duties' not where the money is earned. This assumes your trading is being taxed as income.

If your trading is taxed as capital gains, then you may have a bit more leeway, as long as the cash is not brought back into the UK. In which case rather than going through the hassle of offshore trusts, look at a simple offshore brokerage account with someone like Internaxx who will domicile the account in Luxembourg as a matter of course.

There may be ways and means to organise all of this, but it really needs professional advice - believe me, I've been through it and it's not simple...

 

[roguetrader]

Been doing some research and discovered any returns I get outside of the UK are not liable for tax anyhow, unless remitted to the UK.

Must check with the tax man but I believe my status is:
Resident, NOT ordinarily resident, NOT domiciled.

Thanks for your replies.

I think there's a lot more research to be done. One of the best barometers (not foolproof, but a useful guide nonetheless) of whether something like that works or not is to ask yourself How obvious, or logical does that seem? When it's fairly obvious then you can guarantee everyman and his dog has thought of it. Funnily enough around this time last year there was an article in the Mail in Sunday entitled 'Common Tax Myths' or something like that. Anyways, right up there with the front runners was the idea that money earned outside the UK and kept outside was not subject to tax.
As Jack o Clubs says, take professional advice, tax is one area you do not want to be winging it

 

[*JDR*]

Get booklet IR20 from HMRC

This is what I read. It "seems" fairly clear. I am definitely not domiciled in the UK.

However, there is a lot more work to be done... and of course professional advice will be sought when finally making any arrangements or decisions.

Thanks All for your help, advice and suggestions.

 

[*JDR*]

too right - one could move to dubai and pay zilch in tax for the cost of a flight and a work permit

Actually, I'm not sure it is even that simple as your Domicile of Origin is still the UK.

 

[roguetrader]

Actually, I'm not sure it is even that simple as your Domicile of Origin is still the UK.

Been there (well not Dubai) done that and was tax free for 5 years, all above board. Npw back in tax

 

[Directional]

Actually, I'm not sure it is even that simple as your Domicile of Origin is still the UK.

As long as you declare yourself non-resident to the Revenue, you have to stay non-resident for six months and anything you earn in Dubai is not under the Inland Revenue jurisdiction.

If you become resident again within six months you have to pay tax for the full duration of your earnings during the interim period of absence (so you cant move abroad for a month, earn a million and then conveniently move back).

This is how I understand it to work for UK citizens, for non-UK residents I dont really know since you may have certain hold-overs from your country of origin. US citizens have to pay the IRS wherever they live in the world - a citizenship tax. The UK revenue is much more flexible thank goodness, as long as you dont cross them.

The VAT people have incredibly draconian powers if they think someone is taking the p!ss

 

[roguetrader]

As long as you declare yourself non-resident to the Revenue, you have to stay non-resident for six months and anything you earn in Dubai is not under the Inland Revenue jurisdiction.

If you become resident again within six months you have to pay tax for the full duration of your earnings during the interim period of absence (so you cant move abroad for a month, earn a million and then conveniently move back).

This is how I understand it to work for UK citizens, for non-UK residents I dont really know since you may have certain hold-overs from your country of origin. US citizens have to pay the IRS wherever they live in the world - a citizenship tax. The UK revenue is much more flexible thank goodness, as long as you dont cross them.

The VAT people have incredibly draconian powers if they think someone is taking the p!ss

Sounds pretty much as I understood it Arbitrageur, I did think you had to be out a tax year, ie a complete April to April though, rather than 6 months, but that was irrelevant to me at the time so I may be mistaken.

The big danger when playing with the IR is not so much whether or not you have actually done anything wrong (though of course that is an issue) but their ability to freeze everything you have and generally make life unpleasant whilst they liesurely investigate. Best always to try and stay straight with them,

 

[Jack o'Clubs]

As long as you declare yourself non-resident to the Revenue, you have to stay non-resident for six months and anything you earn in Dubai is not under the Inland Revenue jurisdiction.

Those are the rules if you're moving abroad for employment, ie in HMRC's phrase 'to work full-time abroad under a contract of employment'. If not, for example you are going to be self-employed as a trader, then rules 2.7-2.9 in the IR20 leaflet come into play which are pretty onerous - if you can't prove you're abroad for a 'settled purpose', that is if they think for a moment that it's just a tax dodge - you have to be gone for three years+ for them to consider you non-resident. 'Settled purpose' sounds vague? Quite so, it's so that they have a huge amount of leeway to interpret individual cases - and you're quite right: the last person you want to get into argy-bargy with is the UK taxman.

 

[Directional]

you're probably right mate, I may be confusing something to do with if you move back within a 12 month tax year, you pay tax IF you start work again within six months of becoming resident.

There was a six month clause in there somewhere, but i cant recall exactly what for - it was a while back and I've pickled a few brain and liver cells in the interim :cheesy:

 

[*JDR*]

The UK tax people certainly seem heavier than in Australia. I am pretty sure that in Australia the tax man is obliged to believe you are doing the right thing unless they can prove otherwise.

Anyway, over here i think you can always request a tax ruling. I am going to do this soon once I work out how to do it and what to ask for.... even if nothing comes of it I would like to know my "official" status with regards to residence and domicility.

Of course there is the issue that I may have inadvertantly already done something wrong and they reply with.. this is your status and by the way you owe us a load of cash ! Perhaps, professional advice and staying under the radar is a better option...