Transferring overseas asset to wife

Steve_666_

My basic understanding is I can transfer any asset to my wife. A long time ago, whilst working overseas, I purchased a "fund" based in Hong Kong. Its been thru a few hands as such but now is managed by JPM. As a 40% tax payer, I'm assuming if I try to touch this money, it will be treated as overseas income and be taxed at 40%. My wife is a 20% tax payer at present, can I transfer this (assuming JPM play ball) and it can then be taken at 20%

MeteredOut

You probably need to state which fund/what type of fund it is, and how it is being held (ie. which product/service).

poseidon1

Steve_666_ said:

My basic understanding is I can transfer any asset to my wife. A long time ago, whilst working overseas, I purchased a "fund" based in Hong Kong. Its been thru a few hands as such but now is managed by JPM. As a 40% tax payer, I'm assuming if I try to touch this money, it will be treated as overseas income and be taxed at 40%. My wife is a 20% tax payer at present, can I transfer this (assuming JPM play ball) and it can then be taken at 20%

More detail required on the fund, especially the degree it has been income producing throughout your period of ownership,

However as well to point out that as a UK tax resident and presumably British born, you were already required to report and pay tax on your world wide income, whether or not it was actually distributed rather than accumulated.

Transferring the investment to your wife is CGT free ( she acquires at your original cost), and her lower rate status will dictate her tax liabilty for the income generated going forward, but this does not address your own past non tax compliance and potential outstanding income tax liabilties already accrued.

Steve_666_

I dont think its income producing[JPM Euroland Equity  A(dist) ] , I just get monthly valuations. Given that funds fluctuate in value, its seems odd that you would have to pay CGT on possible gains, when loses could happen tomorrow. What date would you use for the valuation. In addition over most of this period I would not have used my CGT allowance, so if that approach was taken then I might not owe any tax?

Cook_County

Assuming this is a non-HMRC reporting fund, UK CGT is not of relevance. I would be starting addressing the answer to this question by researching UK tax law relating to offshore income gains. 

poseidon1

Steve_666_ said:

I dont think its income producing[JPM Euroland Equity  A(dist) ] , I just get monthly valuations. Given that funds fluctuate in value, its seems odd that you would have to pay CGT on possible gains, when loses could happen tomorrow. What date would you use for the valuation. In addition over most of this period I would not have used my CGT allowance, so if that approach was taken then I might not owe any tax?

The clue is in the title you gave  ie A (dist).

Assuming the product you now hold accords with the fund link below, then you have an income producing offshore unit trust which distributes its income ( and potential capital) annually - 

https://am.jpmorgan.com/hk/en/asset-management/per/products/jpm-euroland-equity-a-dist-usd-lu0117904457#/distribution

Last recorded distribution yield appears to be 1.39%.

Not sure what your question relating to date of valuation refers.

If you are transferring the fund to your wife as originally intimated, she receives the investment at your original purchase cost ( not valuation), less any capital cash distributions that may have been included in the annual distributions you were supposed to have received. Even if you have no knowledge of the annual distributions, you must at least have some recollection of what you paid for the original investment?

In any event, assuming you are showing an unrealised capital  profit over the years of ownership , this appears to be exposed to potential CGT on eventual sale, subject to £3,000 annual exemptions.

 Just to be clear annual CGT exemptions are on a 'use it or lose it basis'. If you never sold any of the JPM fund in the past ( or any other CGT asset for that matter), then past CGT exemptions are irretrievably lost. CGT rates are  now 18% or 24% depending on whether you are basic or higher rate tax payer.

Cook_County

If this is a non-reporting fund, there is zero annual CGT exemption and gains are subject to income tax, not CGT. It would be helpful if the OP would let us know if this or is not a reporting fund.

poseidon1

Cook_County said:

If this is a non-reporting fund, there is zero annual CGT exemption and gains are subject to income tax, not CGT. It would be helpful if the OP would let us know if this or is not a reporting fund.

OP unlikely to know.

However JPM purports to publish their own list of reporting status funds ( liable  to  cgt on sale) per link below -

https://am.jpmorgan.com/content/dam/jpm-am-aem/emea/regional/en/supplemental/notice-to-shareholders/jpmorgan-investment-funds-sicav-2024.pdf

These all appear to be Luxembourg based sicavs, and the Euroland Equity fund is not listed.

To put matters beyond doubt, OP could check HMRC's list of all reporting funds to make sure their fund is not listed there -

https://www.gov.uk/government/publications/offshore-funds-list-of-reporting-funds

If it does not appear on HMRCs list, then as you have advised, this is indeed a non-reporting fund with the more unfortunate income tax treatment arising on realised offshore income  gains (OIGs).

As intimated in your earlier post OP will need to acquaint himself with the income tax treatment accorded to non reporting funds. The following HMRC link could be a starting point - 

https://www.gov.uk/government/publications/offshore-funds-self-assessment-helpsheet-hs265/hs265-offshore-funds

My post, with regard to CGT treatment will only apply if by some miracle the JPM fund does appear on HMRC's list of reporting funds.

Steve_666_

Yes, its in the list of reporting funds, so is it just CGT or do I have to have 30+ years of income/interest/dividend

J

J0039

JPMorgan Funds

J0039-0049

JPM Euroland Equity A (dist) - EUR

LU0089640097

poseidon1

Steve_666_ said:

Yes, its in the list of reporting funds, so is it just CGT or do I have to have 30+ years of income/interest/dividend

J

J0039

JPMorgan Funds

J0039-0049

JPM Euroland Equity A (dist) - EUR

LU0089640097

It's qualified good news that the present iteration of your investment is now acknowledged by HMRC as a reporting fund.

However, for you that is not the whole story.

You indicate that JPM is the last of a succession of investment firms that managed your investment.

The next question therefore is whether the predecessor firms had non- reporting status prior to the JPM regime and if so did JPM's takeover constitute a conversion of the fund from non- reporting to reporting status?

This is an important question because for you to now benefit from reporting fund CGT treatment, it would have been necessary for you to make an election under transitional provisions as set out in the article below -

https://mooreks.co.uk/insights/offshore-reporting-funds/#:~:text=If an offshore fund is,tax, transitional rules are required.

As you will see, if your investment was non reporting at some point in its history but you made no election at the point of conversion and paid income tax on accrued gains at that time, your investment remains subject to income tax at your marginal rate under the non reporting regime, notwithstanding it's current reporting status.

Accordingly, it would appear incumbent on you to contact JPM and establish whether they are aware of the funds reporting status prior to their takeover of the brief.

Specifically, was it at some point either non reporting, or prior to 2009 ( when  reporting fund categorisation was introduced) was it a distributor or non- distributor fund?

As you will see from the above, this is what @Cook_County meant by you needing to acquaint yourself with the rules relating to non reporting funds.

However, returning  to your opening question, if you accept the investment is subject to income  tax on eventual sale, you can transfer to your wife and as a basic rate tax payer she can sell and only pay tax at a current rate of 20% unless the gain pushes her into the next tax band.  Familiarise yourself with the self assessment reporting requirements if you decide to go down that road.

Cook_County

Assuming this is indeed the correct fund, and it is a reporting fund, are you currently disclosing both actual distributions plus ERI to HMRC each year. If not, HMRC will expect you to use the WDF to correct matters. Not all fund managers provide ERI. You may need to calculate this yourself.