scope of tax exemption on ISAs

chartie

Heres a poser that not many seem to want to answer for some reason.

In the case of ISAs, does "free of income and capital gains tax" apply to "all" income and capital gains tax or just "UK" income and capital gains tax?

I'm a full british citizen and my broker has a W8-BEN form for me.
at the moment I pay foreign investor tax of 15% on dividends in my ordinary dealing account.

So if I went for income and held overseas "income fund" shares, and the US or Canadian revenue offices taxed income from them under the foreign investor tax rules, would this be re-claimed if in a UK isa?

Selftrade has backed away from an answer.
I checked the hmrc.gov.uk site, but despite plenty of info, the answer is not there and its not easy to identify an appropriate email address for them.

any answers or pointers, anyone?

RayWolfe

I think you'll find that ISAs are free of UK tax.

tom188

Although for UK Stocks and Shares the tax credit paid is no longer refundable. (so only reason to keep in ISA is for CGT or if you are a higher rate tax payer).

chartie

Thanks for your tips folks.
I've also had a reply from another broker ...

"The tax charge on income from overseas assets depends on the originating country. For example the US tax is 30% and the Canadian tax is 15%. These taxes are deducted at source similar to the 10% tax credit on UK dividends. We are not a tax specialist so if you would like definitive answers to your queries your should contact a tax specialist.

If investments are held outside of an ISA an overseas tax of up to15% will count towards your UK income tax bill. With regard to holdings held within an ISA the overseas tax that is charged is deducted at source and therefore cannot be reclaimed. The Canadian 15% tax is the lowest tax you are entitled to pay. However, due to the investments being held in an ISA there will be no further UK income or capital gains tax to pay on the investments held. "

EdInvestor

You can't avoid paying the withholding taxes applied abroad.

Holding UK shares in an ISA will mean you don't pay 25% tax on divis if you are an HRT ( BRTs don't pay tax on divis anyway).Also you wont pay CGT: however there is an annual allowance of nearly 9k, so most people don't pay CGT anyway.