Offshore Investment Funds

leosayer

Hi everyone, newbie here.:j

Please could you confirm/refute my understanding on the tax implications in this area.

I am a UK taxpayer/resident and I'm thinking of investing on some offshore funds registered in British Virgin Islands. These funds don't distribute income.

Am I right in saying that I will only pay Income tax on any profit when I sell the funds regardless of how long they have been held?

This also implies that it would be better for my wife to hold these in her name as she is in a lower tax bracket than me.

Are there any other implications I should be aware of?

Many thanks

EdInvestor

If the funds don't pay income then it's likely you will be subject to capital gains tax, not income tax, over the annual CGT allowance of c.9k on realised gains.

Cook_County

I am afraid that Ed is quite wrong on this. From the way the question is written, it seems most likely that any profit will be taxed under the offshore income gain rules. These can be advantageous for folks anticipating retirement/departure from the UK or other UK tax deferral.

However these do have the consequence of no CGT exemption and no taper relief.

If either of you are not UK domiciled then the tax answer would be better though, because you could avoid UK tax entirely.

You will need to ask the fund manager if these are approved as distributor funds in the UK if you want certainty.

leosayer

Thanks, these are definitely non-distributor funds.

Is holding the shares in my child's name an option for saving tax when I sell? I understand there is a IR limit of £100 on interest earned in child bank accounts but I'm not sure about other income.

Can you also confirm the same is true if my wife holds the shares?

Thanks

Cook_County

I don't see why your child or wife could not hold the investments, but of course they would no longer be your savings.

You may also want to familiarise yourself with the cost and procedures for probating your Will in the BVI, in case something unfortunate happens, because you probably wouldn't want to leave a horrid unexpected liability.