GBP and USD cash interests on brokerage account - onshore or foreign in tax return?

megatower

I earned some interests from GBP and USD cash balance with 3 brokerage accounts (i.e., Interactive Investor, Interactive Brokers, and Schwab) and am confused whether they should be counted toward onshore or foreign interests in tax return. 

Interactive Investor - Since it's a UK company, the GBP makes sense to be onshore, but would USD be counted as foreign?

I held both GBP and USD at Interactive Brokers, and only USD Schwab. Both headquarters are in US though they have local offices in UK, would make them onshore (at least for the GBP)?

Any suggestion would be much appreciated.

sausage_time

I have always declared my Schwab US interest and dividends with HMRC.   I assume you have a complete W8BEN?   The double taxation treaty should apply.

megatower

Yes I do - though they only withhold tax on dividend, but not on the cash interest. Would that make any difference (in other word, the double taxation is only applied to stocks/funds)?

sausage_time

Yes, I see 15% withheld on dividends (versus 30% with no W8BEN).

poblomov

For the interest on cash balances in a brokerage account, the currency won't determine whether it is UK-source or non-UK.

It'll be where the account is held.

I would go by what tax report you get for the account. If you get one for the UK tax year, it would suggest it is UK based. If you get a US tax report or form like a 1099 it would suggest it's a US based account

masonic

US withholding taxes only apply to underlying assets that are US domiciled. Most likely this is a local foreign currency account in the case of II, but the other two could be either so should be asked if unsure.

I don't know the answer to the question, but the notes are often helpful in scenarios like this. I suspect foreign currency interest from a UK account should to be converted to sterling and included with other UK interest. The foreign pages are for overseas savings.

megatower

poblomov said:

For the interest on cash balances in a brokerage account, the currency won't determine whether it is UK-source or non-UK.

It'll be where the account is held.

I would go by what tax report you get for the account. If you get one for the UK tax year, it would suggest it is UK based. If you get a US tax report or form like a 1099 it would suggest it's a US based account

Thanks, going with the letter logically makes sense to me.

One extension would be how to treat the UK stock in a US based account (e.g. UK stock held in Interactive Brokers)? Presumably that'd be offshore/foreign based on the account. 

megatower

masonic said:

US withholding taxes only apply to underlying assets that are US domiciled. Most likely this is a local foreign currency account in the case of II, but the other two could be either so should be asked if unsure.

I don't know the answer to the question, but the notes are often helpful in scenarios like this. I suspect foreign currency interest from a UK account should to be converted to sterling and included with other UK interest. The foreign pages are for overseas savings.

Thanks - for the notes, did you mean making notes as part of the tax return application for clarity?

masonic

megatower said:
One extension would be how to treat the UK stock in a US based account (e.g. UK stock held in Interactive Brokers)? Presumably that'd be offshore/foreign based on the account. 

Dividends from a UK stock, such as Lloyds Banking Group for example, surely could not be considered foreign dividends by HMRC.

poblomov

megatower 

Thanks, going with the letter logically makes sense to me.

One extension would be how to treat the UK stock in a US based account (e.g. UK stock held in Interactive Brokers)? Presumably that'd be offshore/foreign based on the account. 

For interest on cash, it's likely to be on deposit in the country in which the brokerage account is based and that's its country of source

The country of source for dividends will be where the company paying the dividend is based. I think is probably where the company is tax resident rather than where the company is incorporated , but most of the time companies will by tax resident in the country they are incorporated in

phlebas192

megatower said:

poblomov said:

For the interest on cash balances in a brokerage account, the currency won't determine whether it is UK-source or non-UK.

It'll be where the account is held.

I would go by what tax report you get for the account. If you get one for the UK tax year, it would suggest it is UK based. If you get a US tax report or form like a 1099 it would suggest it's a US based account

Thanks, going with the letter logically makes sense to me.

One extension would be how to treat the UK stock in a US based account (e.g. UK stock held in Interactive Brokers)? Presumably that'd be offshore/foreign based on the account. 

You would need to consider where the legal entity was based. eg whilst Interactive Brokers are US owned I believe that if you open an account with them from the UK it will be with "Interactive Brokers (U.K.) Limited" which is registered in the UK.