Offshore Funds

metalhead_2

Hi,

When I got divorced I put my share of the proceeds of the sale of my house into shares in Guernsey. I could now do with the money in England for my new mortgage. I understand that I would not have to pay tax on capital that I bring back but that I would on interest earned. As the dividends were paid back into the account would the government want tax on the difference between what I put into Guernsey and what I brought back or would I just pay tax on any interest that I earn once the money is brought back?

Cheers

John

Cook_County

I am confused by your post. You talk about "shares" and "the account". Do you have shares in a Guernsey company or money on deposit with a Guernsey bank/building society?

How long has it been there (roughly)?

metalhead_2

Sorry, it is shares. The dividend was reinvested to buy more shares. I have had it for three years.

Cheers

John

pin

FYI, due to double tax treaties between the UK and the States of Guernsey, people domiciled in the UK are liable for UK taxes for any income, capital gains, etc deriving from Guernsey.

I would seek financial advice as to your position.

Cook_County

It is impossible to tell the answer without knowing if this investment is of the kind that is caught by the offshore income gain rules (or even has approved distributor status).

Can you say the name / type of investment and also whether or not you are domiciled within the UK?

cheerfulcat

metalhead wrote:

Hi,
As the dividends were paid back into the account would the government want tax on the difference between what I put into Guernsey and what I brought back or would I just pay tax on any interest that I earn once the money is brought back?

Cheers

John

You are liable for tax on the dividends. If they are UK shares they will have come with a tax credit which will cover basic rate tax payable on them; if you are a higher rate taxpayer there will be extra tax to pay ( or rather, there was extra tax to pay when you received the dividends, regardless of the fact that they were re-invested ).

There is also capital gains tax to be paid on any gains over your CGT exemption. CGT is payable only on disposal of an asset. As well as your exemption ( £8,800 for this tax year ) you may have some taper relief available. Also, the cost of the re-invested dividends should be added to the original cost of the investment.

This is all assuming that your tax situation is straightforward, and that this is an ordinary share account, which I suspect is not the case! Under the circumstances, I too would suggest that you see a professional - not an IFA, but a tax specialist. if you don't already have an accountant ( chartered tax adviser for preference ), you can find one here.