Interest on USD with Wise?

uptdale

wmb194 said:

uptdale said:

Bear in mind that the UK tax treatment of Wise interest is a little different from the UK tax treatment of UK interest or foreign interest.  I can't see anything on the Wise website explaining the UK tax treatment, but there is some explanation in the BlackRock prospectus (https://www.blackrock.com/cash/en-gb/stream-document?stream=reg&product=L-ILSG&shareClass=SELECT+ACC+T0&documentId=1393108~1391594&iframeUrlOverride=/cash/literature/prospectus/ics-prospectus.pdf).  The BlackRock fund is an offshore fund, and from HMRC Helpsheet HS262 it looks like you are taxed on your share of the income received by the BlackRock fund.  So it seems the interest is reported as "income received by a person abroad" in Box 13 of the Foreign pages (SA106) of the self assessment tax return, not as "interest and other income from overseas savings" (Box 4).

It's an ETF, not a person or trust, so that doesn't sound right.

Wise is using Irish domiciled accumulating ETFs with UK reporting status so I presume it's a case of treating the increase in the value of the units as a capital gain on disposal and the undistributed income as excess reportable income (ERI), which in this case, as it invests in bonds, is treated as foreign interest.

YMMV for the others but the good news is that I checked the KPMG ERI database for the euro one for the past few years and it had no excess to report, so nothing to worry about anyway.

Extract from the taxation section of the prospectus for this range of BlackRock ICS ETFs ("Institutional Cash Series plc"):

That's very helpful, thanks for that.  It's reassuring that a third-party website says that it is a Reporting Fund, but the Prospectus does not seem to spell that out.  The extract that you quote is from the paragraphs on "United Kingdom Taxation.  The Company".  It explains what a Reporting Fund is, but does not actually say whether all or any of the sub-funds are Reporting Funds.  I was concerned that the paragraphs on "United Kingdom Taxation.  Investors" do not say whether the sub-funds are Reporting Funds either, but do say:

"The attention of individuals resident in the UK for UK taxation purposes is drawn to the provisions of Chapter 2 of Part 13 of the Income Tax Act 2007. These provisions are aimed at preventing the avoidance of income tax by individuals through transactions resulting in the transfer of assets or income to persons resident or domiciled abroad and may render such individuals liable to income tax in respect of undistributed income or profits of the Company on an annual basis.

On 22 April 2009, the Government announced that distributions from offshore bond funds would be subject to income [sic] in the hands of UK individual investors at their applicable tax rate. The announcement was effective from 22 April 2009."

This looks like a case of sloppy drafting.

The fund is part of a non-resident company, and it seems to me that the transfer of assets abroad regime would apply if it is not a Reporting Fund.  You would think that both Wise and BlackRock would make the UK tax treatment clear.

wmb194

uptdale said:

wmb194 said:

uptdale said:

Bear in mind that the UK tax treatment of Wise interest is a little different from the UK tax treatment of UK interest or foreign interest.  I can't see anything on the Wise website explaining the UK tax treatment, but there is some explanation in the BlackRock prospectus (https://www.blackrock.com/cash/en-gb/stream-document?stream=reg&product=L-ILSG&shareClass=SELECT+ACC+T0&documentId=1393108~1391594&iframeUrlOverride=/cash/literature/prospectus/ics-prospectus.pdf).  The BlackRock fund is an offshore fund, and from HMRC Helpsheet HS262 it looks like you are taxed on your share of the income received by the BlackRock fund.  So it seems the interest is reported as "income received by a person abroad" in Box 13 of the Foreign pages (SA106) of the self assessment tax return, not as "interest and other income from overseas savings" (Box 4).

It's an ETF, not a person or trust, so that doesn't sound right.

Wise is using Irish domiciled accumulating ETFs with UK reporting status so I presume it's a case of treating the increase in the value of the units as a capital gain on disposal and the undistributed income as excess reportable income (ERI), which in this case, as it invests in bonds, is treated as foreign interest.

YMMV for the others but the good news is that I checked the KPMG ERI database for the euro one for the past few years and it had no excess to report, so nothing to worry about anyway.

Extract from the taxation section of the prospectus for this range of BlackRock ICS ETFs ("Institutional Cash Series plc"):

That's very helpful, thanks for that.  It's reassuring that a third-party website says that it is a Reporting Fund, but the Prospectus does not seem to spell that out.  The extract that you quote is from the paragraphs on "United Kingdom Taxation.  The Company".  It explains what a Reporting Fund is, but does not actually say whether all or any of the sub-funds are Reporting Funds.  I was concerned that the paragraphs on "United Kingdom Taxation.  Investors" do not say whether the sub-funds are Reporting Funds either, but do say:

"The attention of individuals resident in the UK for UK taxation purposes is drawn to the provisions of Chapter 2 of Part 13 of the Income Tax Act 2007. These provisions are aimed at preventing the avoidance of income tax by individuals through transactions resulting in the transfer of assets or income to persons resident or domiciled abroad and may render such individuals liable to income tax in respect of undistributed income or profits of the Company on an annual basis.

On 22 April 2009, the Government announced that distributions from offshore bond funds would be subject to income [sic] in the hands of UK individual investors at their applicable tax rate. The announcement was effective from 22 April 2009."

This looks like a case of sloppy drafting.

The fund is part of a non-resident company, and it seems to me that the transfer of assets abroad regime would apply if it is not a Reporting Fund.  You would think that both Wise and BlackRock would make the UK tax treatment clear.

You worry far too much; it says that it will apply for reporting status and according to HMRC it did:

https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds#full-publication-update-history

pecunianonolet

Thanks all for deep diving into all the regs and taxation. However, since my value isn't guaranteed like a savings account this isn't for me. Any other suggestions welcome :-)