chiangmai
Crazy Mango Extraordinaire
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Post by chiangmai on Sept 12, 2017 16:37:35 GMT 7
Back to the issue of UK tax for a moment:
The First Issue, UK tax on an expat (over five years expatriation) drawdown pension – payments taken currently are free of tax as long as they are within the limits of the Personal Allowance – as a non-resident expat there is no CG liability and the pension is exempt from IHT. If the Personal Allowance is removed from the expat, there is no tax impact as long as no drawdown payments are taken……..correct or not?
The Second Issue, UK tax on UK onshore investments – payments taken are subject to the limits of the Personal Allowance, the expat is CG exempt by virtue of non-residency BUT the income on accumulation units is taxable even though it isn't paid out (and the basis cost for capital gains tax is increased by the amount of the income, so it isn't also taxed as a capital gain)…..correct or not?
The Third Issue, loss of the Personal Allowance – if the First Issue is correct there is no impact; if the second issue is correct the choices are to pay the tax on any income earned and taken, or move the fund offshore, or……?
Note: the source for the statement regarding ACC units and CG in The Second Issue above is from another forum.
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Post by Fletchsmile on Sept 13, 2017 11:33:26 GMT 7
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Post by mangomoney on Sept 13, 2017 11:36:31 GMT 7
Moved to a new thread as tax on UK pensions is a useful thread in its own right
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Post by Fletchsmile on Sept 13, 2017 12:13:58 GMT 7
For the second point, if the fund is held inside an ISA or SIPP then you have no income or capital gains tax to worry about even as a UK based investor Accumulation units are deemed to have "notional income" for the dividends rolled up, and this is taxed in the same way as dividend paying units. Yes, any income automatically rolled into the fund (such as accumulation units) is not liable for capital gains tax as it has already been subject to income tax. So yes you need to adjust the cost calculations for CGT purposes. This is a lot of record keeping. So when considering dividend paying units vs accumulation units as well as tax implications someone has to think about the admin side too. Did a quick google rather than type further myself, and this was one of the first articles which is quite good and worth you reading www.youinvest.co.uk/articles/sharesmagazine/89901/income-versus-accumulation-unitsRelating to your third issue. Most of my UK investments are in either an ISAs or SIPP. One for income tax/ CGT. Two for ease of admin. After that I prefer to invest via Singapore or Thailand. Also the IHT aspect is important. If they are in UK they may more likely still be captured by the IHT net, so another reason to move money away from the UK. |
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chiangmai
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Post by chiangmai on Sept 13, 2017 12:23:14 GMT 7
It appears the rules on domicile have been relaxed since I last looked at them, it used to be until fairly recently that it was almost impossible to change domicile, especially if a person had income arising in the UK. That's very good news of course compared to the days when Lord Denning, Master of the Rolls (ham and cheese I think), famously said, (and you have to stuff your mouth with cotton wool to get the right effects here) "a domicile is not like a raincoat that can be worn or discarded at will", in other words, you have zero chance of convincing us that the UK is not your domicile and you will be taxed accordingly. And the part about being taxed again after age 75 is a strange one, draw down payments free of tax until age 75 then taxed again after age 75, what's that all about I wonder, is government trying to incentivise us!  Back to the questions in the OP, thanks Fletch for the links which address the first one, the second is perhaps slightly more tricky. As I understand it presently, long term expat non-pension ACC units are taxed in the same way INC units are, this in lieu of CG. So the question is, is that correct? The significance of this question is I think that if the Personal Allowance is removed, holding only ACC units onshore UK wont allow any escape from UK tax or reduction of it, albeit it wont be CG tax. EDIT TO ADD: I see you've replied whilst I was typing, thanks for that.. |
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GavinK
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Post by GavinK on Sept 13, 2017 12:23:21 GMT 7
I suspect that HMRC guidance re 17/20 years and permanent home in UK at 3 years relates to non-British nationals. HMRC will typically deem a Brit to be a UK dom and it will be down to the executor to successfully argue that the deceased was a non-UK dom. The deceased will never know the result - you can't get HMRC to agree it prior to the death AFAIK.
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chiangmai
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Post by chiangmai on Sept 13, 2017 12:33:35 GMT 7
I suspect that HMRC guidance re 17/20 years and permanent home in UK at 3 years relates to non-British nationals. HMRC will typically deem a Brit to be a UK dom and it will be down to the executor to successfully argue that the deceased was a non-UK dom. The deceased will never know the result - you can't get HMRC to agree it prior to the death AFAIK. Are there two sets of HMRC rules, different based on a persons nationality, I doubt it to be honest. |
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chiangmai
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Post by chiangmai on Sept 13, 2017 14:19:50 GMT 7
For the second point, if the fund is held inside an ISA or SIPP then you have no income or capital gains tax to worry about even as a UK based investor Accumulation units are deemed to have "notional income" for the dividends rolled up, and this is taxed in the same way as dividend paying units. Yes, any income automatically rolled into the fund (such as accumulation units) is not liable for capital gains tax as it has already been subject to income tax. So yes you need to adjust the cost calculations for CGT purposes. This is a lot of record keeping. So when considering dividend paying units vs accumulation units as well as tax implications someone has to think about the admin side too. Did a quick google rather than type further myself, and this was one of the first articles which is quite good and worth you reading www.youinvest.co.uk/articles/sharesmagazine/89901/income-versus-accumulation-unitsRelating to your third issue. Most of my UK investments are in either an ISAs or SIPP. One for income tax/ CGT. Two for ease of admin. After that I prefer to invest via Singapore or Thailand. Also the IHT aspect is important. If they are in UK they may more likely still be captured by the IHT net, so another reason to move money away from the UK. That's a good article, thanks for posting it. I'm personally in good shape as far as potential tax/CG on my new onshore investment but when the Personal Allowance goes I may need to rethink things. EDIT TO ADD: FWIW Transact does the CG calculation on each portfolio, where applicable, hence the record keeping looks like it's not too onerous. |
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Post by rgs2001uk on Sept 13, 2017 23:09:55 GMT 7
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